Special Financial Assistance by PBGC

Published date12 July 2021
Citation86 FR 36598
Record Number2021-14696
SectionRules and Regulations
CourtPension Benefit Guaranty Corporation
Federal Register, Volume 86 Issue 130 (Monday, July 12, 2021)
[Federal Register Volume 86, Number 130 (Monday, July 12, 2021)]
                [Rules and Regulations]
                [Pages 36598-36631]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2021-14696]
                [[Page 36597]]
                Vol. 86
                Monday,
                No. 130
                July 12, 2021
                Part IIPension Benefit Guaranty Corporation-----------------------------------------------------------------------29 CFR Parts 4000 and 4262Special Financial Assistance by PBGC; Interim Final Rule
                Federal Register / Vol. 86 , No. 130 / Monday, July 12, 2021 / Rules
                and Regulations
                [[Page 36598]]
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                PENSION BENEFIT GUARANTY CORPORATION
                29 CFR Parts 4000 and 4262
                RIN 1212-AB53
                Special Financial Assistance by PBGC
                AGENCY: Pension Benefit Guaranty Corporation.
                ACTION: Interim final rule; request for comments.
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                SUMMARY: This document contains an interim final rule that sets forth
                the requirements for special financial assistance applications and
                related restrictions and conditions pursuant to the American Rescue
                Plan Act of 2021.
                DATES:
                 Effective date: This interim final rule is effective on July 12,
                2021.
                 Comment date: Comments must be received on or before August 11,
                2021 to be assured of consideration.
                ADDRESSES: Comments may be submitted by any of the following methods:
                 Federal eRulemaking Portal: http://www.regulations.gov.
                Follow the online instructions for submitting comments.
                 Email: [email protected].
                 Mail or Hand Delivery: Regulatory Affairs Division, Office
                of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K
                Street NW, Washington, DC 20005-4026.
                 Commenters are strongly encouraged to submit public comments
                electronically. PBGC expects to have limited personnel available to
                process public comments that are submitted on paper through mail. Until
                further notice, any comments submitted on paper will be considered to
                the extent practicable.
                 All submissions must include the agency's name (Pension Benefit
                Guaranty Corporation, or PBGC) and title for this rulemaking (Special
                Financial Assistance by PBGC) and the Regulation Identifier Number for
                this rulemaking (RIN 1212-AB53). Comments received will be posted
                without change to PBGC's website, www.pbgc.gov, including any personal
                information provided. Do not submit comments that include any
                personally identifiable information or confidential business
                information.
                 Copies of comments may also be obtained by writing to Disclosure
                Division, Office of the General Counsel, Pension Benefit Guaranty
                Corporation, 1200 K Street NW, Washington, DC 20005-4026 or calling
                202-229-4040 during normal business hours. TTY users may call the
                Federal relay service toll-free at 800-877-8339 and ask to be connected
                to 202-229-4040.
                FOR FURTHER INFORMATION CONTACT: Daniel S. Liebman
                ([email protected]; 202-229-6510) Deputy General Counsel, Program
                Law and Policy Department, Hilary Duke ([email protected]; 202-229-
                3839), Assistant General Counsel for Regulatory Affairs, or Stephanie
                Cibinic ([email protected]; 202-229-6352), Deputy Assistant
                General Counsel for Regulatory Affairs, Office of the General Counsel,
                Pension Benefit Guaranty Corporation, 1200 K Street NW, Washington, DC
                20005-4026. TTY users may call the Federal Relay service toll-free at
                800-877-8339 and ask to be connected to 202-229-6510, 202-229-3839, or
                202-229-6352.
                SUPPLEMENTARY INFORMATION:
                Executive Summary
                Purpose and Authority
                 This interim final rule adds to the regulations of the Pension
                Benefit Guaranty Corporation (PBGC) a new part 4262 to implement the
                requirements under section 9704 of the American Rescue Plan Act of
                2021, ``Special Financial Assistance Program for Financially Troubled
                Multiemployer Plans.'' This program enhances retirement security for
                millions of Americans by providing eligible multiemployer defined
                benefit pension plans with special financial assistance (SFA) in the
                amounts required for the plans to pay all benefits due during the
                period beginning on the date of payment of SFA through the plan year
                ending in 2051.
                 PBGC's legal authority for this rulemaking comes from new section
                4262 of the Employee Retirement Income Security Act of 1974 (ERISA)
                (Special Financial Assistance by the Corporation), which requires PBGC
                to issue regulations or guidance setting forth requirements for SFA
                applications by July 9, 2021, permits PBGC to provide for how SFA and
                earnings thereon are to be invested, and, in consultation with the
                Secretary of the Treasury, permits PBGC to impose reasonable conditions
                by regulation or other guidance on an eligible multiemployer plan that
                receives SFA. PBGC's legal authority also comes from section 4002(b)(3)
                of ERISA, which authorizes PBGC to issue regulations to carry out the
                purposes of title IV of ERISA, and from section 4003(a) of ERISA, which
                authorizes PBGC to conduct investigations and audits.
                Major Provisions of the Regulatory Action
                 This rulemaking sets forth what information a plan is required to
                file to demonstrate eligibility for SFA and the amount of SFA to be
                paid by PBGC to the plan. It identifies which plans will be given
                priority to file applications before March 11, 2023, and provides for a
                processing system, which will accommodate the filing and review of many
                applications in a limited amount of time. It also establishes
                permissible investments for SFA funds and restrictions and conditions
                on plans that receive SFA.
                Background
                PBGC and the Multiemployer Insurance Program
                 PBGC administers two insurance programs for private-sector defined
                benefit pension plans under title IV of ERISA: One for single-employer
                defined benefit pension plans and one for multiemployer defined benefit
                pensions plans (multiemployer plans). In general, a multiemployer plan
                is a collectively bargained plan involving two or more unrelated
                employers. The multiemployer insurance program protects the benefits of
                approximately 10.9 million workers and retirees in approximately 1,400
                plans. This interim final rule deals with multiemployer plans.
                 The multiemployer insurance program provides PBGC with tools to
                help plans that are insolvent or approaching insolvency to be able to
                pay guaranteed benefits.\1\ This help is primarily in the form of
                financial assistance loans under section 4261(a) of ERISA. Under that
                provision, when a multiemployer plan becomes insolvent, PBGC provides
                periodic financial assistance payments to the insolvent plan in amounts
                that, together with existing plan assets and any other plan income, are
                sufficient to pay guaranteed benefit amounts to participants and
                beneficiaries. In general terms, a plan is insolvent if it cannot pay
                benefits when due.
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                 \1\ Multiemployer plan guaranteed benefits are primarily
                nonforfeitable benefits and the maximum guarantee is set by law
                under section 4022A of ERISA.
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                 The Multiemployer Pension Reform Act of 2014 (MPRA) created
                pathways under ERISA to help improve solvency for plans that are likely
                to become insolvent. Plans that are in critical and declining status
                \2\ may apply to the U.S.
                [[Page 36599]]
                Department of the Treasury (Treasury Department) for a suspension of
                benefits under section 305(e)(9) of ERISA to avoid insolvency.
                Generally, under this process, these plans may propose a reduction of
                benefits to no less than 110 percent of PBGC's guaranteed benefit
                amount if a plan is projected to become insolvent before paying all
                promised benefits when due. A plan may also request partition
                assistance from PBGC (under section 4233 of ERISA), which allows the
                plan to transfer responsibility for paying monthly guaranteed benefits
                for a portion of the plan's participants and beneficiaries to a newly
                created successor plan that receives financial assistance from PBGC.
                When a partition is approved, the original plan has an ongoing
                obligation to pay and preserve benefits for all participants at levels
                above PBGC's guaranteed amounts.
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                 \2\ A plan is in critical and declining status if the plan
                satisfies the criteria for critical status under section 305(b)(2)
                of ERISA and is projected to become insolvent within the meaning of
                section 4245 during the current plan year or any of the 14
                succeeding plan years (or 19 succeeding plan years if the plan has a
                ratio of inactive participants to active participants that exceeds 2
                to 1 or if the funded percentage of the plan is less than 80
                percent).
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                 MPRA also allows critical and declining plans that are likely to
                become insolvent to request financial assistance from PBGC upon merging
                with another multiemployer plan (``facilitated mergers'' under section
                4231(e) of ERISA). Financial assistance to the merged plan may promote
                mergers with more viable plans and eliminate the need for benefit
                reductions.
                 In recent years, Congress considered a range of proposals to
                address the funding crisis in the multiemployer pension system,
                including proposals to expand PBGC's partition authority, loan
                programs, and broader reforms to stabilize multiemployer plans and
                extend the solvency of PBGC's multiemployer insurance program. In 2018,
                Congress created the Joint Select Committee on Solvency of
                Multiemployer Pension Plans to develop recommendations to address the
                problems in the multiemployer pension system. While the Committee did
                not issue recommendations before its term expired, it succeeded in
                creating a broader understanding of the issues and identifying
                potential reforms. While not a permanent solution, Congress enacted,
                and the President signed into law on March 11, 2021, the American
                Rescue Plan (ARP) Act of 2021 (Pub. L. 117-2), to address the immediate
                crisis facing severely underfunded multiemployer plans and the solvency
                of PBGC, and to assist plans by providing funds to reinstate suspended
                benefits.
                American Rescue Plan Act of 2021--Special Financial Assistance Program
                for Financially Troubled Multiemployer Plans
                 ARP creates a program to enhance retirement security for millions
                of Americans by providing SFA to financially troubled multiemployer
                plans. The SFA program is expected to assist plans covering more than 3
                million participants and beneficiaries, including the provision of
                funds to reinstate suspended monthly benefits going forward, and for
                make-up payments to restore previously suspended benefits of
                participants and beneficiaries. In turn, the SFA program improves the
                financial condition of PBGC's multiemployer insurance program. It is
                expected that over 100 plans that would have otherwise become insolvent
                during the next 15 years will instead forestall insolvency as a direct
                result of receiving SFA.
                 Section 9704 of ARP amends section 4005 of ERISA to establish an
                eighth fund for SFA from which PBGC will provide SFA to multiemployer
                plans under the program created by the addition of section 4262 of
                ERISA. The eighth fund will be credited with amounts from time to time
                as the Secretary of the Treasury, in conjunction with the Director of
                PBGC, determines appropriate, from the general fund of the Treasury
                Department. Transfers from the general fund to the eighth fund cannot
                occur after September 30, 2030.
                 New section 4262 of ERISA sets forth the requirements for SFA,
                including specifying which plans are eligible to apply, the cutoff date
                for applications, actuarial assumptions, determinations on
                applications, restrictions on the use of SFA, and that certain plans
                with suspended benefits \3\ must reinstate those benefits and provide
                make-up payments to restore previously suspended benefits. Unlike the
                financial assistance provided under section 4261 of ERISA, which is in
                the form of a loan and provided in periodic payments, a plan receiving
                SFA under section 4262 has no obligation to repay SFA, and PBGC must
                pay SFA in the form of a single, lump sum payment.
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                 \3\ Plans with suspended benefits pursuant to sections 305(e)(9)
                and 4245(a) of ERISA.
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                 Section 4262 of ERISA requires PBGC to prescribe in regulations or
                other guidance the requirements for SFA applications, including an
                alternate application for plans with an approved partition under
                section 4233 of ERISA. PBGC also may prioritize applications during the
                first 2 years after March 11, 2021, prescribe how SFA funds are to be
                invested, and impose conditions on plans that receive SFA.
                 Although PBGC's rulemakings generally involve coordination and
                consultation with the other two agencies that have jurisdiction over
                pension plans (the Treasury Department and the U.S. Department of Labor
                (Department of Labor or Department)), section 4262 of ERISA
                specifically provides for consultation with the Treasury Department
                particularly on SFA applications involving a plan's reinstatement of
                suspended benefits.\4\ The statute also provides for consultation with
                the Treasury Department with respect to a plan that proposes in its
                application to change assumptions, with respect to a plan that files an
                application under PBGC regulations or guidance prioritizing certain
                applications, and on the conditions imposed on plans that receive
                SFA.\5\ This interim final rule is a result of that coordination and
                consultation, which will continue as the SFA program gets underway at
                PBGC and plans begin to apply.
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                 \4\ See sections 4262(k) and 4262(n) of ERISA.
                 \5\ See sections 4262(m) and 4262(n) of ERISA.
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                Listening Sessions and Request for Comment
                 After ARP was enacted, interested parties requested to share their
                views with PBGC, and PBGC held listening sessions at their request.
                Representatives of PBGC's Board of Directors (the Secretaries of the
                Department of Labor, the Treasury Department, and the Department of
                Commerce) also participated in these listening sessions. Most of the
                requesters provided letters or agendas outlining their concerns. In
                addition, other interested parties sent PBGC letters communicating
                their views. PBGC considered the views and concerns expressed, which
                helped to inform this interim final rule.
                 PBGC has included a request for public comment in this rulemaking
                and encourages all interested parties to submit their comments,
                suggestions, and views concerning the rule's provisions. PBGC is
                particularly interested in feedback on where any additional guidance
                may be needed.
                Overview and Section-by-Section Discussion of Regulation
                Overview and Purpose
                 To implement section 4262 of ERISA, PBGC is adding a new part 4262
                to its regulations, ``Special Financial Assistance by PBGC.'' The
                purpose of this new part is to prescribe rules governing applications
                for SFA and related requirements. Part 4262 provides guidance to
                multiemployer pension plan sponsors on eligibility, determining the
                amount of SFA, content of an application for SFA, the process of
                applying, PBGC's review of
                [[Page 36600]]
                applications, and restrictions and conditions.
                Eligible Multiemployer Plans
                 There are four types of multiemployer plans identified in section
                4262(b)(1) of ERISA that are eligible to apply for SFA under Sec.
                4262.3 of PBGC's regulation. This exclusive list consists of:
                 (1) A plan in critical and declining status (within the meaning of
                section 305(b)(6) of ERISA) in any plan year beginning in 2020, 2021,
                or 2022.
                 (2) A plan with a suspension of benefits approved under section
                305(e)(9) of ERISA as of the date ARP became law (March 11, 2021).
                 (3) A plan certified to be in critical status (within the meaning
                of section 305(b)(2) of ERISA) that has a modified funded percentage of
                less than 40 percent and a ratio of active to inactive participants
                which is less than 2 to 3, in any plan year beginning in 2020, 2021, or
                2022.
                 (4) A plan that became insolvent for purposes of section 418E of
                the Internal Revenue Code (the Code) after December 16, 2014 (the date
                MPRA became law), has remained insolvent, and has not terminated under
                section 4041A of ERISA as of March 11, 2021.
                 PBGC notes that a plan that terminated by mass withdrawal in a plan
                year that ended before January 1, 2020, is not eligible for SFA under
                section 4262(b)(1)(A) of ERISA and Sec. 4262.3(a)(1) (plans that are
                in critical and declining status (within the meaning of section
                305(b)(6) of ERISA) in any plan year beginning in 2020, 2021, or 2022).
                This is because the additional funding rules for plans in endangered,
                critical, and critical and declining status under section 432 of the
                Code do not apply to such a plan in a plan year that begins in 2020,
                2021, or 2022.\6\ Accordingly, a plan that terminated by mass
                withdrawal before the plan year selected to determine eligibility under
                Sec. 4262.3(a)(1) is not in critical and declining status for that
                year and therefore is not eligible for SFA. For example, if a plan in
                critical and declining status terminated by mass withdrawal in 2019,
                the plan would not be eligible for SFA under Sec. 4262.3(a)(1) because
                it was not in critical and declining status in 2020, 2021, or 2022.
                However, if a plan in critical and declining status terminated by mass
                withdrawal in 2020, the plan would be eligible for SFA.
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                 \6\ Section 412(a)(1) of the Internal Revenue Code (the Code)
                requires a pension plan to satisfy the minimum funding standard
                applicable to the plan for each plan year. In the case of a
                multiemployer defined benefit plan, section 412(a)(2)(C) provides
                that participating employers must make contributions under the plan
                for a plan year that, in the aggregate, are sufficient to ensure
                that the plan does not have an accumulated funding deficiency under
                section 431 as of the end of the plan year. Section 412(e)(4)
                provides that the minimum funding rules under section 412 apply
                until the last day of the plan year in which a plan terminates
                within the meaning of section 4041A(a)(2) of ERISA (that is,
                termination by mass withdrawal or a cessation of the obligation of
                all employers to contribute under the plan). Accordingly, the rules
                of section 431 of the Code do not apply to such a plan for periods
                after the plan year of termination.
                 The Internal Revenue Service (IRS) has informed PBGC that
                section 432 of the Code, which provides additional funding rules for
                multiemployer plans in endangered status or critical status,
                likewise does not apply to a multiemployer plan for periods after
                the plan year of termination within the meaning of section
                4041A(a)(2) of ERISA. This is consistent with section 301(c) of
                ERISA (over which the IRS has interpretive jurisdiction pursuant to
                section 101 of Reorganization Plan No. 4 of 1978 (43 FR 47713)),
                which provides that part 3 of title I of ERISA, including the
                minimum funding rules parallel to sections 412, 431, and 432 of the
                Code, applies until the last day of the plan year in which the plan
                terminates within the meaning of section 4041A(a)(2) of ERISA.
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                 With respect to critical status plans, PBGC provides some
                clarifications on eligibility. Section 4262.3(c)(1) clarifies that a
                plan that has elected to be in critical status under section 305(b)(4)
                of ERISA but is not certified to be in critical status under section
                305(b)(2) is not an eligible multiemployer plan. To ensure uniformity
                for applications and clarify what data to use to satisfy eligibility
                requirements for critical status plans under section 4262(b)(1)(C),
                Sec. 4262.3(a)(3) and (c)(2) specify the data that is used for this
                purpose, including specifying line items entered on the Form 5500
                Schedule MB to determine the ``modified funded percentage,'' and line
                items entered on the Form 5500 to determine the ratio of active to
                inactive participants.
                 Under the regulation, the conditions for eligibility do not need to
                be satisfied for the same plan year. PBGC adds this flexibility in
                recognition that the filing dates for the certification of plan status
                and the Form 5500 are not the same. Generally, the due date for filing
                the certification of plan status is well over a year before the due
                date for filing the Form 5500 for the same plan year. In addition, data
                used for the certification of plan status for a plan year may be from a
                different year than the data used for the Form 5500 for the same plan
                year, and section 4262 of ERISA is unclear as to the date within a plan
                year as of which data used to satisfy the conditions is determined.
                 Section 4262(b)(2) of ERISA defines ``modified funded percentage''
                to mean the percentage equal to a fraction the numerator of which is
                the current value of plan assets (as defined in section 3(26) of ERISA)
                and the denominator of which is current liabilities (as defined in
                section 431(c)(6)(D) of the Code).
                 The numerator for the plan's funded percentage under Sec.
                4262.3(c)(2) is calculated using the current value of assets on line 2a
                of Schedule MB,\7\ which is also required to be reported on line 1l,
                column (a) of the Schedule H,\8\ and adding to it the current value of
                withdrawal liability payments due to be received by the plan on an
                accrual basis reflecting a reasonable allowance for amounts considered
                uncollectible \9\ (if not already included in the current value of net
                assets reported on line 2a). The value calculated for the numerator is
                consistent with the meaning of current value of assets under section
                3(26) of ERISA.\10\ The current value of assets includes total cash
                contributions due to be received on an accrual basis.
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                 \7\ All line references in this section are to the 2020 Form
                5500 and schedules.
                 \8\ The 2020 Form 5500 instructions provide that, with certain
                exceptions, assets reported on line 2a of Schedule MB should be the
                same as reported on line 1l, (column a) of the Schedule H.
                 \9\ PBGC notes that Financial Accounting Standards Board (FASB)
                Accounting Standards Codification (ASC) 960, Plan Accounting--
                Defined Benefit Pension Plans 960-310-25-3A states: ``A
                multiemployer plan may also have a receivable for a withdrawing
                employer's share of the plan's unfunded liability. The plan should
                record the receivable, net of any allowance for an amount deemed
                uncollectible, when entitlement has been determined.''
                 \10\ The withdrawal liability payments due to be received by the
                plan are not included in the actuarial value of assets or the market
                value of assets for purposes of sections 431 and 432 of the Code and
                the corresponding sections 304 and 305 of ERISA.
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                 The denominator for the plan's funded percentage under Sec.
                4262.3(c)(2) is calculated using the current liability measurement from
                line 2b(4) column (2). This entry requires current liability to be
                calculated using the assumptions, including interest rate, in the
                instructions for line 1d(2)(a) of the Schedule MB. Those instructions
                provide how to calculate current liability under section 431(c)(6)(D)
                of the Code and provide specifically that the interest rate used to
                compute current liability must be in accordance with guidelines issued
                by the Treasury Department and the Internal Revenue Service (IRS) and
                within the interest rate rules referred to under section 431(c)(6)(D),
                which are outlined under section 431(c)(6)(E). PBGC notes that the
                current liability is a measure derived using an interest rate chosen by
                the actuary within a ``permissible range'' under section 431(c)(6)(E).
                Since the selection of the interest rate by the actuary is part of the
                determination of current liability, for purposes of measuring the
                modified funded
                [[Page 36601]]
                percentage PBGC has chosen to accept the interest rate selected by the
                actuary and not to require the use of an alternate interest rate.
                 As explained earlier in this section of the preamble, section
                4262(b)(1)(C) of ERISA requires as one of the conditions of
                eligibility, for critical status plans to have a ratio of active to
                inactive participants that is less than 2 to 3. The statute does not
                specify what participant count to use. To fill in this gap, the
                regulation refers to end-of-year participant counts on the Form 5500.
                On the 2020 Form 5500, these are the number of participants identified
                on line 6a(2) (for total number of active participants) and the sum of
                lines 6b, 6c, and 6e (for inactive participants: Retired or separated
                participants receiving benefits, other retired or separated
                participants entitled to future benefits, and deceased participants
                whose beneficiaries are receiving or are entitled to receive benefits).
                Requiring the use of these counts provides for uniformity among
                applications in the use of participant counts to determine the ratio.
                Assumptions for Determining Eligibility
                 A plan's eligibility for SFA is determined by PBGC in accordance
                with Sec. 4262.3(d) of the regulation, which incorporates the
                actuarial assumptions for determining eligibility found in sections
                4262(e)(1) and (e)(4) of ERISA. When a plan sponsor applies for SFA
                claiming the plan's eligibility based on a certification of either
                critical status or critical and declining status completed before
                January 1, 2021, PBGC is required to accept the assumptions
                incorporated into that certification unless the assumptions are clearly
                erroneous.
                 When a plan sponsor applies for SFA and claims the plan is eligible
                based on a certification of plan status for a plan year that was not
                completed before January 1, 2021, the sponsor must determine whether
                the plan is in critical status or critical and declining status using
                the assumptions that were used in the plan's most recently completed
                certification before January 1, 2021, unless those assumptions
                (excluding the plan's interest rate) are unreasonable. A plan sponsor
                that determines that one or more of the assumptions used in the plan's
                most recently completed certification before January 1, 2021, is
                unreasonable may propose changes to the assumptions in the plan's
                application (except to the interest rate) by disclosing the changes,
                describing why such assumptions are no longer reasonable, and
                demonstrating that the changed assumptions are reasonable.
                 The information required to be included as part of an application,
                including to support changes to assumptions, is described in Sec. Sec.
                4262.6 through 4262.8 of the regulation. PBGC's review of the
                assumptions used by a plan are described in Sec. 4262.5 of the
                regulation.
                Amount of Special Financial Assistance
                 Under section 4262(a)(1) of ERISA, PBGC is to provide SFA to an
                eligible multiemployer plan upon application. Under section 4262(j)(1),
                the amount of SFA to be provided is the ``amount required for the plan
                to pay all benefits due during the period beginning on the date of
                payment of the special financial assistance payment . . . and ending on
                the last day of the plan year ending in 2051 . . . .'' This is referred
                to in section 4262(i)(1) as ``the amount necessary as demonstrated by
                the plan sponsor.'' PBGC believes that the plain meaning of the
                statutory language is that SFA is the amount by which a plan's
                resources fall short of its obligations, taking all plan resources and
                obligations into account.
                 The heart of the matter is found in the requirement that SFA be
                ``the amount necessary'' or ``required for the plan to pay all benefits
                due.'' To the extent that a plan has other means available to pay
                benefits, it does not require or need SFA for that purpose.\11\ Thus,
                all of a plan's resources must be considered in determining the amount
                of SFA for the plan. Moreover, since the determination must be made by
                looking through the end of the last plan year ending in 2051, the
                resources to be considered must include plan assets and income
                (contributions, investment returns, etc.). If Congress had contemplated
                the exclusion of these resources in the calculation of the amount of
                SFA ``required for the plan,'' it would have done so explicitly.
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                 \11\ Furthermore, it would not be a reasonable result if the
                amount of SFA were to be calculated under a formula that disregards
                the plan's available resources, which could lead to a windfall for a
                plan that needs only a small amount of SFA to pay benefits. PBGC
                estimates that under such an approach, the total amount of SFA
                distributed under the program would increase by 2 to 4 times the
                estimated $94 billion amount projected under PBGC's ME-PIMS model.
                See section (4), Estimated Impact of Regulatory Action, of the
                Regulatory Impact Analysis section.
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                 Additionally, all of a plan's benefits must be considered, as the
                statute says clearly ``all benefits.'' And, because plan expenses must
                be paid to keep the plan in operation and capable of paying benefits,
                all expenses must likewise be taken into account. In short, the
                statutory language, by requiring the payment of all benefits due,
                mandates by clear implication the consideration of all plan obligations
                and resources in determining the amount of SFA that is needed or is
                ``necessary.''
                 Some interested parties commented to PBGC on section 4262(j)(1) of
                ERISA that, in determining the amount of SFA, PBGC should exclude from
                consideration all or a portion of one or more plan obligations or
                resources, such as existing assets, expected benefit payments, earnings
                on assets, contributions, withdrawal liability, and administrative
                expenses. The items to be disregarded, and the theories on which they
                are to be ignored, differ from one commenter to another.
                 The common thread among these comments is that they advance a
                particular policy goal or desired outcome and an approach designed to
                fit that desired policy goal or outcome. Such desired goals include
                providing generous assistance, long-term sustainability, avoiding a
                recurrence of the current crisis, protection of retirees, and
                simplicity. The approaches advanced to achieve such goals vary among
                commenters, but include disregarding resources such as current assets,
                or the portion thereof needed to fund post-2051 payments; future
                contributions; and other sources of revenue. In considering these
                comments, PBGC has concluded that the approaches recommended in these
                comments could be supported only by a strained reading of the clear
                language of section 4262(j)(1), which defines the SFA amount as the
                ``amount required for the plan to pay all benefits due during the
                period beginning on the date of payment of the special financial
                assistance payment under this section and ending on the last day of the
                plan year ending in 2051 . . . .''
                 The inability to project resources and obligations with absolute
                precision for 30 years prompted another objection to the plain meaning
                of the language in question from some interested parties. The benefits
                projected to be paid into the future will rarely turn out to be the
                same as the benefits that actually will be paid (which can only be
                determined in hindsight). These interested parties argued that the
                amount of SFA is insufficient unless it enables a plan to pay ``all
                benefits'' actually due through the last plan year in 2051, for example
                by assuming zero mortality for that period. However, this approach
                would be a radical departure from accepted actuarial practice and would
                be at odds with the pattern of actuarial determinations that underlies
                section 4262 of ERISA. PBGC thus considers this suggestion to be
                contradictory to the statute.
                [[Page 36602]]
                Calculating the Amount of SFA
                 Section 4262.4(a) provides that the amount of SFA for a plan is the
                amount (if any), subject to adjustment for the date of payment as
                described in Sec. 4262.12, by which the value of all plan obligations
                exceeds the value of all plan resources, determined as of the plan's
                SFA measurement date and limited to the SFA coverage period (the period
                ending on the last day of the last plan year ending in 2051). The SFA
                measurement date is the last day of the calendar quarter immediately
                preceding the date the plan's application was filed.
                 The value of plan obligations under Sec. 4262.4(b) is the sum of
                the present value of specified benefit payments and administrative
                expenses. The value of benefit payments is calculated as the present
                value of benefit payments expected to be paid during the SFA coverage
                period including any reinstatement of benefits attributable to the
                elimination of reductions in a participant's or beneficiary's benefit
                due to a suspension of benefits under sections 305(e)(9) or 4245(a) of
                ERISA as required under Sec. 4262.15 or restoration of benefits under
                26 CFR 1.432(e)(9)-1(e)(3). The reinstatement of benefits must be
                calculated assuming such reinstatements are paid beginning as of the
                SFA measurement date instead of the date SFA is paid. The value of
                administrative expenses is calculated as the present value of
                administrative expenses expected to be paid during the SFA coverage
                period (excluding the amount owed to PBGC under section 4261).
                 The value of plan resources under Sec. 4262.4(c) is the total of
                the fair market value of assets on the SFA measurement date and the
                present value of future contributions, withdrawal liability payments,
                and other payments expected to be made to the plan (excluding the
                amount of financial assistance under section 4261 of ERISA and the
                amount of SFA to be received by the plan) during the SFA coverage
                period.
                 The amount of financial assistance owed to PBGC under section 4261
                of ERISA, if any, is excluded in the calculation of SFA in the plan's
                application. Instead, it is added to the amount of SFA to be paid to
                the plan under Sec. 4262.12 as of the date PBGC sends payment of SFA,
                offset by the value of financial assistance payments under section 4261
                received by the plan following the SFA measurement date, accumulated
                with interest.
                 The projections in Sec. 4262.4(b)(1) and (2) and (c)(2) must be
                performed on a deterministic basis using a single set of assumptions as
                provided in Sec. 4262.4(d). The deterministic projections must be
                based on recent participant census data. Participant census data must
                be as of the first day of the plan year in which the plan's initial
                application is filed, or, if the date on which the plan's initial
                application is filed is less than 270 days after the beginning of the
                current plan year and the actuarial valuation for the current plan year
                is not complete, the projections may instead be based on the
                participant census data as of the first day of the plan year preceding
                the year in which the plan's initial application is filed. If a plan
                experiences a significant event between the date of the plan's most
                recent participant census date and the date the application is filed,
                PBGC's assumptions guidance (issued on PBGC's website at www.pbgc.gov/guidance) provides guidelines on how to reflect that significant event.
                Plans may, but are not required to, use the guidelines if they are
                reasonable for the plan.
                 The SFA measurement date, which is the beginning date for the
                deterministic projections, is a date certain in the past instead of a
                payment date in the future because the SFA payment date (described
                under Sec. 4262.12) is unknown at the time the plan sponsor files the
                application. This approach of using a date certain in the past instead
                of a date in the future simplifies the calculation but does not change
                the SFA amount that would otherwise be calculated as of the payment
                date because: (i) Both the SFA-eligible plan resources and SFA-eligible
                plan obligations will be reduced equally by the benefit payments and
                expenses between those two dates, (ii) the contributions between those
                two dates would typically need to be estimated either way, and (iii)
                the SFA amount is adjusted for interest between those two dates at the
                interest rate used to calculate the present values as of the SFA
                measurement date.
                 Section 4262.4(e)(1) of the regulation specifies the interest rate
                assumption a plan must use to calculate the amount of SFA in the plan's
                application. Section 4262(e)(2)(A) of ERISA requires a plan to use an
                interest rate that is based on the rate used in the plan's most
                recently completed certification of plan status before January 1, 2021,
                subject to an interest rate limit, but does not consider that there are
                potentially two rates used in a certification of plan status: A short-
                term rate (used for projecting plan assets) and a long-term rate (used
                to determine plan liabilities and for interest adjustments in the
                funding standard account). As the determination of the SFA amount
                involves long-term projections, the regulation specifies that the SFA
                amount is calculated based on the long-term rate that was used for
                funding standard account purposes in the plan actuary's projections
                that are part of the certification of plan status.
                 The interest rate limit specified in section 4262(e)(3) of ERISA is
                the rate that is 200 basis points higher than the rate specified in
                section 303(h)(2)(C)(iii) (disregarding modifications made under clause
                (iv) of such section) ``for the month in which the plan's application
                for SFA is filed or the 3 preceding months.'' This provision places a
                ``cap'' on the interest rate, and that the cap is any permissible rate
                for a month during the 4-month period ending with the month in which
                the plan's application was filed.
                 Section 4262(f) of ERISA suggests that a plan may have multiple
                filing dates by providing two applications deadlines: One for initial
                applications and one for revised applications. There is no limit to the
                number of times that a plan sponsor may file revised applications as
                long as the last revised application is filed by the statutory deadline
                of December 31, 2026. Once PBGC has accepted an application for
                processing, PBGC believes that it is in the best interest of all
                parties to avoid the duplicative work and delays that would result if a
                revised application were to use a different interest rate. To prevent
                multiple filings for purposes of changing the interest rate, PBGC
                establishes a rule in Sec. 4262.11(c) that the assumed interest rate
                will always be the rate used in the plan's initial application.
                 Accordingly, under Sec. 4262.4(e)(1), the assumed interest rate is
                the interest rate that is the lesser of the rate used by the plan for
                funding standard account projections in the plan's most recently
                completed certification of plan status before January 1, 2021, or the
                rate that is 200 basis points higher than the rate specified in section
                303(h)(2)(C)(iii) of ERISA (disregarding modifications made under
                clause (iv) of such section) for any month selected by the plan in the
                4-month period ending with the month in which the plan's application
                was filed (or the month in which the initial application was filed if
                there was more than one filing date). If an application is revised as
                provided under Sec. 4262.11 of the regulation, the interest rate used
                for the revised application must be the same as the interest rate used
                for the initial application.
                 Some interested parties commented that the interest rate required
                under section 4262(e) of ERISA should only apply to the earnings on
                current plan assets and that PBGC should allow a separate rate to be
                used to determine the amount of SFA required to pay for benefits not
                provided by current plan
                [[Page 36603]]
                assets. Of those commenters, some contend that because the 2020
                certifications of plan status did not include an interest rate
                assumption for SFA, the interest rate should reflect expected returns
                for investment grade bonds. To determine eligibility, for
                certifications of plan status completed after December 31, 2020,
                section 4262(e)(1) requires a plan to use its most recently completed
                certification of plan status before January 1, 2021, unless such
                assumptions, excluding the plan's interest rate, are unreasonable
                (emphasis added). To determine the amount of SFA, section 4262(e)(2)
                mandates that a plan must ``use the interest rate used by the plan in
                its most recently completed certification of plan status before January
                1, 2021, provided that such interest rate may not exceed the interest
                rate limit.'' These provisions do not require the interest rate used
                under the certification of plan status to be reasonable for purposes of
                eligibility or determining the amount of SFA. Under section 4262(e)(4),
                if a plan determines that use of one or more prior assumptions is
                unreasonable, the plan may propose to change such assumption. This
                provision specifically states that the plan may not propose a change to
                the interest rate required for eligibility or SFA amount. In addition,
                PBGC does not have authority to provide a different rate or bifurcate
                the statutorily mandated interest rate.
                 For assumptions other than the interest rate, Sec. 4262.4(e)(2)
                provides that a plan must use the assumptions that the plan used in its
                most recently completed certification of plan status before January 1,
                2021, unless such assumptions are unreasonable. If a plan determines
                that use of one or more of the assumptions in its most recently
                completed certification of plan status before January 1, 2021, is
                unreasonable, the plan may propose in its application to change the
                assumptions as provided in Sec. 4262.5 of the regulation.
                 The information required to be included as part of an application,
                including to support changes to assumptions, is described in Sec. Sec.
                4262.6 through 4262.8 of the regulation. PBGC's review of the
                assumptions used by a plan is described in Sec. 4262.5 of the
                regulation.
                Calculating the Amount of SFA With Respect to Certain Events
                 Section 4262.4(f) addresses the possibility that a plan may
                implement certain changes that could entitle the plan to more SFA than
                was intended under section 4262 of ERISA. In these situations, the
                amount of SFA that would apply to a plan is limited to the amount of
                SFA determined as if the events described in Sec. 4262.4(f) had not
                occurred. These events include mergers, transfers of assets or
                liabilities (including spinoffs), certain increases in accrued or
                projected benefits, and certain reductions in contribution rates. The
                limitation applies to events that occur between July 9, 2021, and the
                SFA measurement date. To accommodate the possibility of multiple
                events, the limitation does not apply on an event-by-event basis but is
                based on comparing the amount of SFA a plan applies for with the amount
                of SFA a plan (or all plans in the case of a merger) would have
                received had the events not occurred.
                 Section 4262(b)(1) of ERISA establishes criteria for eligibility of
                a multiemployer plan for SFA, and section 4262(j) provides for
                determining the amount of the SFA, but these provisions do not address
                the situation in which a multiemployer plan has engaged in a
                transaction that affects the amount of SFA to which a plan is entitled,
                including through the manipulation of the eligibility criteria.
                Moreover, section 4262(e)(2)(B) provides, as a general rule, that the
                actuarial assumptions to be used by a plan are the assumptions used in
                the plan's actuarial certification for the most recently completed
                certification of plan status before January 1, 2021 (unless those
                assumptions are unreasonable), indicating that the plan applying for
                SFA must have been in existence and had an actuarial certification as
                to its status before January 1, 2021. The provisions regarding interest
                rate assumptions under section 4262(e)(2)(A) are specific to the plan
                in its most recent certification of plan status completed before
                January 1, 2021, and, under the terms of section 4262(e), those
                assumptions cannot be changed. A manipulation of those rates via a
                merger would not be consistent with that requirement. Although the
                statute does not directly address plan mergers, each plan's assumptions
                from the most recently completed pre-2021 certification of plan status
                must be maintained in order for section 4262(e) to have meaning with
                respect to the plans that merged. This rule fills the gap left in the
                statute for the calculation of SFA for plans that have been involved in
                a merger.
                 It is likewise appropriate for PBGC, as a prudent steward of
                taxpayer funds, and with responsibility for carrying out the purposes
                of the title IV insurance program,\12\ to impose conditions on plans
                receiving SFA designed to ensure that plans receive no more than the
                amount of SFA to which they are entitled. PBGC concludes that, to
                achieve that end, it is reasonable not to give effect to changes made
                to a plan's structure or terms on or after July 9, 2021, if such
                changes either artificially inflate the amount of SFA to which a plan
                is entitled or convert an ineligible plan into an eligible plan.
                ---------------------------------------------------------------------------
                 \12\ PBGC's inherent authority under section 4002(b)(3) of ERISA
                allows PBGC to adopt regulations to carry out the purposes of the
                title IV insurance program.
                ---------------------------------------------------------------------------
                 Section 4262(m)(1) of ERISA expressly authorizes PBGC, in
                consultation with the Secretary of the Treasury, to impose reasonable
                conditions ``on an eligible multiemployer plan that receives special
                financial assistance'' relating to certain aspects of plan terms or
                operations. Such conditions include those relating to the diversion of
                contributions to, and allocation of expenses to, other benefit plans;
                increases in future accrual rates and any retroactive benefit
                improvements; and reductions in employer contribution rates. PBGC's
                authority to impose reasonable conditions under section 4262(m)(1) is
                not limited to restrictions on a plan following its receipt of SFA
                given that these conditions apply to a plan that ``receives'' SFA,
                rather than a plan that has received SFA. That understanding of section
                4262(m)(1) finds further support in section 4262(m)(2), which restricts
                the conditions that PBGC can impose not only ``following receipt of''
                SFA, but also ``as a condition of'' SFA. That broad prohibition would
                be unnecessary if PBGC's authority under section 4262(m)(1) was limited
                to only post-receipt conditions.
                 Accordingly, pursuant to section 4262(m) of ERISA, in conjunction
                with sections 4002(b)(3) and 4262(e), PBGC is authorized to impose
                reasonable conditions that ensure that SFA is provided to plans in an
                amount that is not inflated by way of contrived events.
                (a) Mergers
                 The rule provides that if two or more plans are merged, then the
                SFA is limited so that it does not exceed the sum of the SFA that would
                have been calculated for all of the plans involved in the merger had
                the plans applied separately for SFA. Thus, a plan that would not have
                been entitled to any SFA if not for a merger that occurs on or after
                July 9, 2021, cannot become entitled to SFA by merging with a plan that
                also would not otherwise be entitled to any SFA. Further, a plan may
                not increase the amount of SFA to
                [[Page 36604]]
                which it is entitled by merging with another plan or plans on or after
                July 9, 2021.
                 As explained earlier in this section of the preamble, this
                condition fills the gap in the rules for the calculation of SFA for
                plans that merge after the most recent certification of plan status
                completed before January 1, 2021. In addition, this requirement is
                consistent with PBGC's authority under section 4262(m)(1) of ERISA to
                impose reasonable conditions relating to the ``diversion of
                contributions to, and allocation of expenses to, other benefit plans.''
                When two or more plans merge, a predecessor plan has diverted its
                contributions and allocated its expenses to the merged plan.
                Specifically, a merged plan, which combines assets and liabilities of
                two or more plans, each with its own set of participants and
                beneficiaries, and to all of whom all the assets (and, thus, all the
                contributions) must be available following the merger, is, in effect,
                diverting contributions intended to benefit one set of participants to
                another.
                (b) Transfers
                 The rule provides that where assets or liabilities are transferred,
                an applicant plan's SFA is limited based on the amount of SFA the plan
                would be entitled to if the transfer did not occur. Similar to mergers,
                this requirement is premised on PBGC's authority under section
                4262(m)(1) of ERISA to impose reasonable conditions relating to the
                ``diversion of contributions to, and allocation of expenses to, other
                benefit plans.''
                (c) Other Events
                 Similar considerations apply to benefit increases and contribution
                reductions. These events are also described in section 4262(m)(1) of
                ERISA, which permits PBGC to impose conditions on the receipt of SFA
                relating to ``increases in future accrual rates and retroactive benefit
                improvements'' and on ``reductions in employer contribution rates.''
                These events are ordinarily thought of as increasing burdens on plans,
                and changes of this type are not commonly adopted with respect to plans
                in financial distress. Because SFA is designed to relieve financial
                distress, creating or increasing burdens could be a net plus for a
                plan. In other words, absent an effective condition in this regulation,
                these events would create artificial financial stress on the plan with
                the expectation that the plan would be compensated through the payment
                of additional SFA. To prevent this manipulation of the standards for
                determining the amount of SFA, the rule provides that SFA is limited to
                the amount that would have applied had the event not occurred.
                 There is an exception to this rule. One possible benefit increase
                could arise from the restoration of benefit suspensions of retirees and
                beneficiaries in pay status that satisfies the requirements of 26 CFR
                1.432(e)(9)-1(e)(3). Under that Treasury Department regulation, the
                restoration of benefits is not subject to the benefit increase
                restrictions under sections 432(e)(9)(E) or 432(f)(1)(B) of the Code,
                and an amendment restoring benefits that satisfies the requirements of
                26 CFR 1.432(e)(9)-1(e)(3) can be adopted at any time. Because a major
                goal of the SFA program is the prompt resumption of payment of
                suspended benefits, the restoration of these benefits should be
                encouraged and the exception in these regulations (under which benefit
                increases pursuant to such an amendment are taken into account in
                determining the amount of SFA) facilitates that goal. If an amendment
                that satisfies 26 CFR 1.432(e)(9)-1(e)(3) is adopted before the SFA
                measurement date, it is taken into account in determining the amount of
                the SFA (as the benefits attributable to the restoration would be if
                the amendment were adopted later), and the adoption is not an event
                that is subject to the limitation on SFA arising from potential abuses.
                 Finally, if two or more plans are merged and any of the plans
                involved in the merger also experienced a transfer of assets or
                liabilities, a benefit increase, or a reduction in contributions that
                would be subject to the limitation in Sec. 4262.4(f) during the period
                described in Sec. 4262.4(f)(1)(i), the amount of SFA for the merged
                plan must be determined by applying the limitation in Sec.
                4262.4(f)(1)(i) to the plan that experienced the other applicable
                event.
                PBGC Review of Plan Assumptions
                 PBGC's review of an application for SFA will focus on the
                reasonableness of the plan's and the plan actuary's demonstration
                regarding the amount of SFA for the plan. Section 4262.5 sets forth how
                PBGC will review plan assumptions.
                 As described earlier, instead of prescribing actuarial assumptions
                to be used for determining SFA, or calling on PBGC to prescribe
                assumptions, section 4262 of ERISA generally looks to plan assumptions
                previously selected by the plan actuary for determining eligibility for
                and calculating the amount of SFA. A mechanism is provided for a plan
                to propose changes to actuarial assumptions if it determines that the
                use of one or more of its original assumptions (other than the interest
                rate) is unreasonable.
                 Actuarial assumptions under section 4262 of ERISA are derived from
                a plan's certification of plan status under section 305 of ERISA. In
                general, PBGC believes that a plan's actuarial assumptions adopted for
                the certification of plan status (and not for entitlement to SFA)
                represent a neutral view of circumstances, unbiased by the prospect of
                receiving a substantial sum of money based on those assumptions.
                Accordingly, PBGC expects to give far less intensive scrutiny to
                ``original'' assumptions than to changed assumptions.
                 PBGC is to accept actuarial assumptions incorporated in a plan's
                certification of plan status completed before 2021 for purposes of
                eligibility under Sec. 4262.3(d)(1) unless PBGC determines that such
                assumptions are ``clearly erroneous.''
                 For all other purposes, PBGC will accept the assumptions used
                unless PBGC determines that they are unreasonable. Each of the
                actuarial assumptions and methods used for the actuarial projections
                (excluding the interest rate), must be reasonable in accordance with
                generally accepted actuarial principles and practices,\13\ taking into
                account the experience of the plan and reasonable expectations. To be
                reasonable, among other things, an actuarial assumption or method must
                be appropriate for the purpose of the measurement, reflect the
                actuary's professional judgment, take into account current and
                historical data that is relevant to selecting the assumption for the
                measurement date, reflect the actuary's estimate of future experience,
                and reflect the actuary's observation of the estimates inherent in
                market data (if any). In addition, an actuarial assumption or method
                must be expected to have no significant bias (i.e., it is not
                significantly optimistic or pessimistic).
                ---------------------------------------------------------------------------
                 \13\ Actuarial Standards of Practice (ASOPs) are issued by the
                Actuarial Standards Board and are available at http://www.actuarialstandardsboard.org/standards-of-practice. Certain
                ASOPs, including ASOPs Nos. 4, 23, 27, 35, 41, and 56 may be
                relevant to the actuary's work related to special financial
                assistance, including the assessment of the reasonableness of the
                actuary's assumptions and methods.
                ---------------------------------------------------------------------------
                 If a plan determines that one or more original assumptions are
                unreasonable and must be changed, Sec. 4262.5(c) provides that the
                plan's application must describe why the original assumption is no
                longer reasonable, disclose the changed assumption, and demonstrate
                that the changed
                [[Page 36605]]
                assumption is reasonable. If there is a change in assumptions, each of
                the actuarial assumptions and methods (other than the interest rate)
                must be reasonable and the combination of those actuarial assumptions
                and methods (excluding the interest rate) must also be reasonable. With
                large amounts of SFA at stake, PBGC will be called on to perform a more
                searching analysis of any changed assumptions. While PBGC expects
                actuaries to be conscientious in setting assumptions, it is a process
                that presents many opportunities for judgment calls that may be
                influenced by the goal of maximizing SFA.
                 Concurrent with this interim final rule, PBGC has issued guidelines
                for changes to certain assumptions that plans may use for purposes of
                determining eligibility for SFA and the amount of SFA. Plans may, but
                are not required to, use the guidelines if they are reasonable for the
                plan. Guidelines are available for contribution base units (CBUs),
                administrative expenses, mortality, contribution rates, and new entrant
                profiles, and can be found in the guidance issued on PBGC's website at
                www.pbgc.gov/guidance.
                 Additionally, PBGC acknowledges that plans may have a gap in the
                assumption for projected CBUs and administrative expenses used in the
                prior certification of plan status such that the assumption cannot be
                used ``as is'' for determining SFA. This is because plans generally do
                not project these assumptions more than 20 years in the future. In
                addition, before the enactment of ARP, if a plan was projected to
                become insolvent within 20 years, then the plan is unlikely to have
                assumptions for CBUs or plan-related administrative expenses for years
                after the projected insolvency date. These are natural practices for
                purposes of a certification of plan status, but a significant
                deficiency where those assumptions are needed to determine the amount
                of SFA. A plan can fill this gap with any reasonable extension of its
                CBU assumption and administrative expense assumption, but that will
                generally mean a ``change'' in assumptions, triggering a more intensive
                (and time-consuming) review by PBGC. To assist applicants and aid in
                the review of a plan's CBU assumption and administrative expense
                assumption, PBGC has developed ``standard'' extensions that plans can
                use to complete the assumption set for a plan that otherwise can use
                its original assumptions. These assumptions are described in the
                guidance mentioned earlier in this section of the preamble.
                Information To Be Filed
                 Sections 4262.6 through 4262.8 of the regulation describe the
                information that must be included in a plan's SFA application. Section
                4262.6 summarizes the requirements for an application to be considered
                complete, including plan information; actuarial and financial
                information (including the amount of SFA requested); a completed
                checklist (per the SFA instructions on PBGC's website at www.pbgc.gov);
                the signature of an authorized trustee who is a current member of the
                board of trustees; a signed penalties of perjury statement; a copy of
                the executed plan amendment providing that, beginning with the SFA
                measurement date, the plan must be administered in accordance with the
                restrictions and conditions specified in section 4262 of ERISA and this
                regulation; a copy of the proposed plan amendment to reinstate benefits
                and pay make-up payments and certification by the plan sponsor that the
                plan amendment will be adopted timely; and information required by PBGC
                to clarify or verify the information in a filed application. If any of
                the information required under this part and in the SFA instructions is
                missing from the filed application, the application will not be
                considered complete.
                 The SFA instructions, including templates, supplement the
                regulation and provide guidance to plan sponsors and practitioners on
                how to prepare and file the required application information.
                 Sections 4262.6 through 4262.8 and the instructions specify the
                minimum necessary plan, actuarial, and financial information that PBGC
                requires to approve or deny an application for SFA and to verify the
                amount of SFA within the short 120-day review window permitted under
                section 4262(g) of ERISA. As described in the Paperwork Reduction Act
                section of this preamble, the application instructions and checklist
                have been submitted to the Office of Management and Budget (OMB) for
                review and approval under the Paperwork Reduction Act. OMB's decision
                regarding this information collection request will be available at
                http://www.Reginfo.gov.
                 Unless confidential under the Privacy Act, all information that is
                filed with PBGC for an application for SFA may be made publicly
                available, at PBGC's sole discretion, on PBGC's website at www.pbgc.gov
                or otherwise publicly disclosed. Except to the extent required by the
                Privacy Act, PBGC provides no assurance of confidentiality in any
                information or documentation included in an application for SFA.
                Application for Plans With a Partition
                 Under section 4233 of ERISA, a plan may apply to PBGC for a
                partition to fund a portion of the plan's benefits to avoid insolvency.
                Upon PBGC's approval of an application for partition, PBGC issues a
                partition order to provide: (1) For a transfer from the original plan
                to the plan created by the partition order (the successor plan), the
                minimum amount of benefit liabilities necessary for the original plan
                to remain solvent, and (2) financial assistance from PBGC under section
                4261 to pay those benefits. The successor plan is but a creature of
                PBGC's partition order, terminated and insolvent from its inception.
                The original and successor plans are required by section 4233(d)(2) to
                have the same plan sponsor and administrator.
                 Section 4262(c)(3) of ERISA requires PBGC to provide an alternative
                application for SFA that may be used for a plan approved for a
                partition before March 11, 2021. Section 4262.9 of PBGC's regulation
                describes this application.
                 The plan sponsor of a partitioned plan must apply for SFA using the
                alternative application, which contemplates PBGC's rescission of the
                partition order as prescribed under Sec. 4262.9(c) and other
                conditions particular to a partitioned plan as described under Sec.
                4262.9(b). One of these conditions is that the plan sponsor must file a
                single application for SFA consisting of information about the original
                plan and the successor plan. The combined information must reflect
                that, on the date SFA is transferred to the plan, PBGC will rescind the
                order that created the successor plan, and the plan sponsor will remove
                plan provisions and amendments that were required to be adopted under
                the order.
                 Another condition is that the application must include a statement
                that the plan was partitioned and a copy of the provisions or
                amendments that the plan was required to adopt under the partition
                order. A partitioned plan's application must include all the required
                information described in Sec. Sec. 4262.6 through 4262.8 for
                applications generally. However, if the plan sponsor of a partitioned
                plan has filed any of the required information with PBGC already, the
                sponsor is not required to include that information again with its SFA
                application. Instead, the sponsor must only note on the checklist
                described under Sec. 4262.6(a) that the information was already filed.
                 Partitioned plans also have benefit suspensions that must be
                reinstated if the plan is approved for SFA. Under
                [[Page 36606]]
                Sec. 4262.15, a plan receiving SFA must reinstate benefits suspended
                under section 305(e)(9) of ERISA and provide make-up payments to
                participants and beneficiaries, to restore previously suspended
                benefits, in accordance with guidance issued by the Treasury Department
                and the IRS. This requirement applies to both the original plan and the
                successor plan created by a partition where benefits under the original
                plan were suspended. Having the original and successor plans apply as
                one will ensure coordinated benefit reinstatements for all participants
                in the partitioned plan.
                 The filing of an application for a partitioned plan falls under
                priority group 2 for purposes of Sec. 4262.10(d) (explained in
                Processing applications), consistent with other plans that are eligible
                for SFA because they have implemented a suspension of benefits under
                section 305(e)(9) of ERISA as of March 11, 2021. The plan sponsor of a
                partitioned plan, therefore, may file an application for SFA beginning
                on January 1, 2022, or earlier date specified on PBGC's website.
                 Partitioned plans have also been receiving financial assistance
                from PBGC with repayment obligations under section 4261 of ERISA. How
                financial assistance under section 4261 is repaid is prescribed under
                Sec. 4262.12(b) of the regulation.
                Processing Applications
                 PBGC expects the SFA program to attract many applicants, and the
                statute makes clear that PBGC is expected to process applications
                quickly. PBGC is required to hold application processing times to
                within 120 days and is given authority to manage that process.
                 Under section 4262(c) of ERISA, PBGC must issue regulations or
                guidance setting forth requirements for SFA applications. Applications
                are considered timely filed under section 4262(g) only if they are
                filed in accordance with PBGC's regulations. PBGC's inherent authority
                under section 4002(b)(3) of ERISA allows PBGC to adopt regulations
                relating to the conduct of its business and to carry out the purposes
                of the title IV insurance program. Under section 4262(d) of ERISA, PBGC
                also may limit the filing of SFA applications to filings for plans that
                are in one or more of four ``priority'' categories during a period
                limited to within the first 2 years after March 11, 2021.
                 While PBGC is confident in its ability to process an application
                within the mandated 120 days, it might not be able to process all
                applications timely if many applications must be processed within a
                brief period. Thus, PBGC is concerned about the rate at which
                applications are submitted for processing. Relying on the
                aforementioned authorities that allow PBGC to administer the SFA
                application process, PBGC has developed a ``metering'' system to manage
                the filing and processing of applications. The goal of this system is
                to process the large number of expected applications within the 120
                days mandated by the statute, while avoiding both ``floods'' of
                applications that could cause applications to be deemed approved (as
                described in Sec. 4262.11) without sufficient PBGC review, and
                ``droughts'' when processing capacity is sitting idle. The risks of an
                insufficiently reviewed application are varied, including, but not
                limited to, SFA payments that are insufficient to meet program
                requirements, and SFA payments that are higher than necessary to meet
                program requirements. These risks are exacerbated by the lump sum form
                of payment required by ARP. To manage these risks and ensure the
                success, integrity, and proper stewardship of the program, it is
                important that PBGC thoroughly review each application.
                 The electronic filing system described in Sec. 4262.10 of the
                regulation is based on three mechanisms. The first mechanism permits
                PBGC to accept applications in a manner that in PBGC's estimation
                allows for sufficient review and processing within 120 days of filing.
                The inherent authority provided by section 4002(b)(3) of ERISA to issue
                regulations related to the conduct of its business, and the directive
                under section 4262(c) to set forth requirements for applications,
                clearly authorize PBGC to limit the number of applications it will
                accept at any one time, and to close the filing window to avoid choking
                the processing system, provided that every prospective submitter has a
                fair opportunity to file its application by December 31, 2025 (or
                December 31, 2026, for a revised application).
                 The second mechanism is a priority system permitted by section
                4262(d) of ERISA. PBGC is establishing ``priority'' periods during
                which an application will be accepted only for a plan that is in the
                category (or one of the categories) to which the period is limited.
                This mechanism is consistent with section 4262(d), although not a
                direct implementation of that provision, which (by its use of the
                disjunctive ``or'') indicates that priority status may be extended to
                any one or more subgroups of priority-status plans and which does not
                limit the number of priority submission windows. Accordingly, PBGC has
                designed this mechanism to prioritize the most impacted plans and
                participants first. For example, the highest priority is given to
                applications of plans that are projected to become insolvent under
                section 4245 of ERISA by March 11, 2022, so that they will not have to
                reduce participant benefits, and plans that are already insolvent, to
                enable them to reinstate benefits and provide make-up payments to
                participants and beneficiaries, to restore previously suspended
                benefits. The objective is to accept and process as many applications
                in the highest priority group as possible before opening the submission
                process to the next priority group. Ultimately--no later than March 11,
                2023--the submission process will be opened to all eligible plans, to
                ensure that every prospective submitter has a fair opportunity to file
                its application during the statutory period. As described earlier in
                this section of the preamble, PBGC will continue to meter the flow of
                applications to avoid exceeding its capacity to process them within 120
                days.
                 PBGC will accept applications for filing for priority group 1
                beginning on July 9, 2021. The second highest priority is given to
                applications of plans that have implemented a suspension of benefits
                under section 305(e)(9) of ERISA as of March 11, 2021, to enable them
                to reinstate benefits and provide make-up payments to participants and
                beneficiaries to restore previously suspended benefits, and plans
                expected to be insolvent within 1 year of the date an application for
                SFA is filed. PBGC will accept applications for filing for priority
                group 2 beginning no later than January 1, 2022. The filing dates for
                applications from the remaining four priority groups (groups 3-6) are
                provided for in Sec. 4262.10(d)(2)(iii) through (vi), with filings for
                priority groups 5 and 6 beginning no later than February 11, 2023. In
                addition, PBGC will specify on its website, at least 21 days in
                advance, the date the last 2 priority groups (groups 5 and 6) may file.
                 This table shows when applications for each priority group may
                begin to be filed.
                [[Page 36607]]
                ------------------------------------------------------------------------
                 Description of priority Date plans may apply
                 Priority group group for SFA
                ------------------------------------------------------------------------
                1..................... Plans already insolvent Beginning on July 9,
                 or projected to become 2021.
                 insolvent before March
                 11, 2022.
                2..................... Plans that implemented Beginning on January 1,
                 a benefit suspension 2022, or earlier date
                 under section specified on PBGC's
                 305(e)(9) of ERISA as website.
                 of March 11, 2021.
                 Plans expected to be
                 insolvent within 1
                 year of the date an
                 application for SFA is
                 filed.
                3..................... Plans in critical and Beginning on April 1,
                 declining status that 2022, or earlier date
                 had 350,000 or more specified on PBGC's
                 participants. website.
                4..................... Plans projected to Beginning on July 1,
                 become insolvent 2022, or earlier date
                 before March 11, 2023. specified on PBGC's
                 website.
                5..................... Plans projected to Date to be specified on
                 become insolvent PBGC's website at
                 before March 11, 2026. least 21 days in
                 advance of such date,
                 but no later than
                 February 11, 2023.
                6..................... Plans for which PBGC Date to be specified on
                 computes the present PBGC's website at
                 value of financial least 21 days in
                 assistance under advance of such date,
                 section 4261 of ERISA but no later than
                 to be in excess of $1 February 11, 2023.
                 billion (in the
                 absence of SFA).
                7..................... Additional plans that Date to be specified on
                 may be added by PBGC PBGC's website no
                 based on other later than March 11,
                 circumstances similar 2023.
                 to those described for
                 priority groups 1-6.
                ------------------------------------------------------------------------
                 As priority groups open, PBGC will continue to accept applications
                from plans in earlier priority groups. While the priority mechanism may
                entail a relatively short deferral of an application for a given plan
                until its respective priority group opens, the amount of SFA ultimately
                awarded will reflect the amount required to pay all benefits due
                pursuant to the statute.\14\
                ---------------------------------------------------------------------------
                 \14\ For instance, the value of plan assets may fluctuate during
                a deferral period and the amount of SFA will adjust based on that
                experience.
                ---------------------------------------------------------------------------
                 Applications of plans in a priority category must also be submitted
                to the Secretary of the Treasury under section 432(k)(1)(D) of the
                Code. If that requirement applies to an application, PBGC will transmit
                the application to the Treasury Department on behalf of the plan, and
                the Treasury Department has provided in guidance (Notice 2021-38) that
                it will treat the requirement under section 432(k)(1)(D) as satisfied.
                 The third mechanism is a notification system on PBGC's website to
                keep prospective applicants apprised of when a filing window opens or
                closes and (if applicable) to what priority groups filing is limited.
                This mechanism will enable applicants to know when the system is
                accepting their priority group's filing.
                 In sum, the system works like this:
                 Applications will be accepted initially only from plans in
                the highest priority group. PBGC will begin accepting applications from
                the other priority groups as of the dates described earlier in this
                section of the preamble (and set forth in Sec. 4262.10(d)(2) of the
                regulation) and posted on PBGC's website at www.pbgc.gov.
                 Applications are processed based on capacity. An
                application will be considered filed on the date it is electronically
                submitted to PBGC if the application meets any applicable priority
                requirements and can be accommodated in accordance with the processing
                system. Otherwise, PBGC will not consider the application filed and
                will notify the applicant that the application must be filed in
                accordance with the processing system and instructions on PBGC's
                website.
                 PBGC will accept as many applications as the agency estimates it
                can process in 120 days. Once the number of applications reaches that
                level, the filing window will temporarily close until PBGC has capacity
                to process more applications. PBGC will maintain a dedicated web page
                for applications on its website at www.pbgc.gov to inform prospective
                applicants about the current status of the filing window, as well as to
                provide advance notice of when PBGC expects to open or temporarily
                close the filing window. PBGC will contact interested prospective
                applicants via email when such new information is available. PBGC will
                also post information about the status of filed applications.
                 A plan sponsor may contact PBGC informally to discuss a potential
                application for SFA.
                Emergency Filings
                 PBGC recognizes that in rare circumstances a plan may experience an
                event that brings it closer to insolvency than previously projected.
                Consistent with section 4262(d)(1)(D) of ERISA, which allows PBGC to
                add priority categories as it determines appropriate based on other
                similar circumstances, PBGC is including an emergency filing process to
                accept priority applications from a plan that is insolvent or expected
                to be insolvent under section 4245(a) of ERISA within 1 year of filing
                an application, or a plan that has implemented a suspension of benefits
                under section 305(e)(9) of ERISA as of March 11, 2021. Beginning with
                PBGC's acceptance of ``priority group 2'' filings, PBGC will accept
                emergency filings from these plans during periods when PBGC would not
                otherwise accept such applications. A filer submitting an application
                under the emergency filing process must substantiate the claim of
                emergency status and notify PBGC, in accordance with the SFA
                instructions on PBGC's website at www.pbgc.gov, before submission of
                the impending application.
                PBGC Action on Applications
                 Section 4262(g) of ERISA provides that PBGC can either approve or
                deny an application for SFA and establishes a short time period during
                which PBGC must act or an application is deemed approved. As described
                under Sec. 4262.11 of the regulation, PBGC must act on an application
                within 120 days after the date an initial or revised application is
                properly and timely filed. If PBGC approves an application, it will
                notify the plan sponsor of the payment of SFA in accordance with Sec.
                4262.12.
                 If PBGC denies an application, it will notify the plan sponsor in
                writing of the reasons for the denial. An application may be denied
                because it is incomplete (it does not accurately include the
                information required to be filed); because an assumption is
                unreasonable, a proposed change in assumption is individually
                unreasonable, or the proposed changed assumptions are unreasonable in
                the aggregate; or because the plan is not an eligible multiemployer
                plan. For example, pending approval of an application if PBGC
                determines that documentation supporting a certification of critical
                and declining status is missing or the plan sponsor has not responded
                to a PBGC request for information to clarify an item in that
                documentation, PBGC's
                [[Page 36608]]
                notice will identify the missing information or documentation required
                to complete the application. If PBGC denies an application, the plan
                sponsor may choose to submit a revised application or withdraw the
                denied application. If the plan sponsor submits a revised application,
                the revised application must not differ from the denied application
                except to the extent necessary to address the reasons stated in PBGC's
                notification for the denial. In other words, PBGC is not requiring a
                plan sponsor to refile the entire application. PBGC only needs the
                information that cures the reasons specified in the denial notice.
                 The plan sponsor may withdraw an application (in writing and in
                accordance with the SFA instructions on PBGC's website, www.pbgc.gov)
                at any time before or after PBGC denies the application, but not after
                PBGC has approved the application. If an application is withdrawn, the
                plan sponsor may refile the application as a revised application.
                 For any revised application, PBGC requires that the ``base data''
                (the SFA measurement date, participant census data, and interest rate
                assumption) remain the same as reported on the plan's initial
                application to guard against multiple filings for purposes of changing
                this data. Once PBGC has accepted an initial application for
                processing, PBGC believes that it is in the best interest of all
                parties to avoid the duplicate work and delays associated with changes
                to the base data. Accordingly, if the plan sponsor withdraws an
                application and submits a revised application it must use the base data
                from its initial application, but it may make other changes.
                 PBGC's decision on an application for SFA is a final agency action
                for purposes of judicial review under the Administrative Procedure Act
                (5 U.S.C. 704).
                Payment of Special Financial Assistance
                 Section 4262(j) of ERISA provides that SFA is the amount required
                for an eligible plan to pay all benefits due from the date PBGC pays
                the SFA to the plan until the last day of the plan year ending in 2051.
                But as described earlier in this preamble, a plan sponsor does not know
                when SFA will be paid at the time the sponsor prepares an application.
                The SFA amount supported by an application and approved by PBGC will be
                the amount appropriate to a date in the past. The amount of SFA could
                be recomputed as of the date of payment, yet the result would still be
                an estimate and the burden of computation would be significant.
                Instead, Sec. 4262.12 provides that PBGC will pay a plan the amount
                demonstrated under the plan's application, determined as of the SFA
                measurement date, plus interest on that amount, representing the time
                differential between the computation and the date PBGC sends payment
                (not the bank settlement date) and using the interest rate equal to the
                rate required under Sec. 4262.4(e)(1).
                 Section 4262.12(d) of the regulation provides that PBGC will pay
                SFA to a plan in a lump sum or substantially so \15\ as soon as
                practicable upon approval of the plan's SFA application. PBGC expects
                payment to be made usually within 60 days, but no later than 90 days
                after the plan's SFA application is approved by PBGC or deemed approved
                (and in any event not later than September 30, 2030). Payment will be
                made in accordance with payment instructions provided by the plan in
                its application. Payment will be considered made when, in accordance
                with the plan's payment instructions, PBGC no longer has ownership of
                the amount being paid. Any adjustment for delay will be borne by PBGC
                only to the extent that it arises while PBGC has ownership of the
                funds.
                ---------------------------------------------------------------------------
                 \15\ For example, if a plan's SFA payment exceeds the statutory
                limitation for a federal wire of $10 billion, the plan will receive
                multiple Fedwire payments that will equal the approved lump sum
                amount.
                ---------------------------------------------------------------------------
                 For a plan with an obligation to repay financial assistance under
                section 4261 of ERISA, the regulation describes the process for that
                repayment.
                 Unlike assistance under section 4261, section 4262(a)(2) of ERISA
                provides that payment of SFA is not a loan subject to repayment
                obligations. However, PBGC clarifies in Sec. 4262.12(d)(1) that SFA is
                subject to recalculation or adjustment to correct a clerical or
                arithmetic error. PBGC will, and plans must, make payments as needed to
                reflect any such changes in a timely manner. SFA is also subject to
                debt collection if PBGC determines that a payment for SFA to a plan
                exceeded the amount to which the plan was entitled. Section
                4262.12(d)(2) provides the rules for payment of a debt owed to the
                Federal Government.
                Restrictions on Special Financial Assistance
                 Section 4262(l) of ERISA places restrictions on the use of SFA.
                These restrictions are described in Sec. 4262.13 of the regulation.
                SFA received, and any earnings thereon, must be segregated from other
                plan assets and may only be used to make benefit payments and pay plan
                expenses (but SFA may be used before other plan assets are used for
                these purposes). In addition, SFA (and earnings) must be invested by
                plans in investment-grade bonds or other investments as permitted by
                PBGC in Sec. 4262.14. These limitations on the use of SFA reflect the
                purpose of SFA. As provided for under section 4262(j)(1) of ERISA and
                in Sec. 4262.4, SFA is the amount required for the plan to pay all
                benefits due during the SFA coverage period taking into account all
                plan resources and obligations. SFA should not be used in a manner that
                would divert SFA funds to other purposes--for instance, reducing
                sources of plan income, such as employer contributions or withdrawal
                liability, or increasing plan obligations, such as to pay for
                additional future increases in benefits.
                Permissible Investments
                 Section 4262(l) of ERISA requires that SFA received, and any
                earnings thereon, may be used to make benefit payments and pay plan
                expenses, and such SFA and earnings must be held separately from other
                plan assets. Section 4262(l) also requires that SFA funds be invested
                in investment-grade bonds or other investments permitted by PBGC.
                 Given the statute's requirement that SFA funds, and any earnings on
                investment of those funds, be used solely to pay benefits and plan
                expenses, PBGC understands that SFA funds should be invested in
                relatively safe vehicles that will help ensure that short-term needs to
                pay benefits and plan expenses can be met. That section 4262(l) of
                ERISA refers to investment-grade bonds first, supports this view. The
                allowance under section 4262(l) for ``other investments permitted by
                the corporation'' could provide some flexibility (as well as limited
                exposure to other assets), but PBGC in this interim final rule is
                reluctant to allow for investment vehicles with fundamentally different
                characteristics without further input from the public.
                 Section 4262.14 of the regulation describes the permitted
                investments of SFA, referred to as permissible investments. To give
                effect to the evident intention that SFA be invested in relatively safe
                investments, the regulation permits SFA and earnings on SFA to be
                invested only in fixed income securities that must be considered
                investment grade except for a 5 percent sleeve that allows a plan to
                hold on to investments that were considered investment grade at the
                time of purchase but are no longer of that credit quality. Thus, SFA
                funds will be fairly protected and plans will have clear expectations
                about what the income return will be.
                [[Page 36609]]
                 Permissible investments may be held in individual fixed-income
                securities or in commingled funds, such as Exchange Traded Funds
                (ETFs), mutual funds, pooled trusts, or other commingled securities
                (which are defined in the regulation as permissible fund vehicles). To
                ensure the quality of the securities that may be invested with SFA, the
                regulation provides that permissible investments are considered
                investment grade if a fiduciary, within the meaning of section 3(21) of
                ERISA, who is or seeks the advice of an experienced investor (such as
                an Investment Advisor registered under section 203 of the Investment
                Advisor's Act of 1940) makes such a determination.
                 For purposes of the regulation, investment grade means publicly
                traded securities for which the issuer has at least adequate capacity
                to meet the financial commitments under the security for the projected
                life of the asset or exposure. Adequate capacity means that the risk of
                default by the obligor is low and the full and timely repayment of
                principal and interest on the security is expected. These definitions
                are consistent with other Federal agency regulations that make
                reference to investment grade securities in compliance with Section
                939A of the Dodd Frank Act of 2010.\16\ Further, the requirement that
                securities be considered investment grade by an experienced investor
                acknowledges that plans receiving SFA, and their advisors, have the
                requisite investment knowledge and experience to make sound investment
                decisions.
                ---------------------------------------------------------------------------
                 \16\ See, e.g., 12 CFR 16.2.
                ---------------------------------------------------------------------------
                 Plans may be able to access fixed-income securities from overseas
                so long as the securities are denominated in U.S. dollars. In practice,
                this would mean that such securities are accessible mainly within
                publicly traded markets.
                 To acknowledge that securities held in ETFs, mutual funds, other
                commingled funds, or directly through a portfolio of individual
                securities, often are supplemented by derivatives that replicate
                exposure to physical bonds or that implement hedging strategies to
                protect against downside risk, the regulation permits investment in
                vehicles allowing for such strategies so long as any derivative or
                leveraging strategy does not increase the interest rate risk or credit
                risk of the investments beyond the risk in a similar portfolio of
                physical securities (i.e., non-derivative securities) with the same
                market value. Further, any notional derivative exposure \17\ on
                permissible investments that are held in separate accounts (i.e., not
                through a permissible fund vehicle), must be supported by liquid assets
                that are cash or cash equivalents denominated in U.S. dollars. This
                will ensure that the plan or the investment manager will be able to
                cover the derivative exposure with little risk to SFA assets.
                ---------------------------------------------------------------------------
                 \17\ Notional value is a term often used to value the underlying
                asset in a derivatives trade. It can be the total value of a
                position, how much value a position controls, or an agreed-upon
                amount in the contract. Definition provided on ``Investopedia'' at
                https://www.investopedia.com/terms/n/notionalvalue.asp.
                ---------------------------------------------------------------------------
                 In listening sessions with interested parties, PBGC heard concerns
                about how overly restrictive requirements on how SFA assets could be
                invested could have significant adverse impacts on overall plan
                financial health. For instance, with interest rates on fixed income
                securities remaining at historically extremely low levels, both SFA and
                other plan assets could be depleted and be unable to pay plan benefits
                long before 2051. PBGC agrees with such concerns. Because PBGC thought
                it important for plans exploring whether to apply for SFA to know what
                restrictions could be placed on investment of SFA funds, PBGC is
                providing a starting point for discussion on permissible investments of
                SFA assets in this interim final rule. With an eye toward finding a
                more appropriate balance between certainty and safety of investments on
                the one hand, and the opportunity for plans to have flexibility to
                decide appropriate overall investment policies on the other, PBGC seeks
                public input for refining Sec. 4262.14. In particular, PBGC requests
                responses, with corresponding data, on the following:
                 (1) PBGC is interested in understanding the potential benefits and
                risks of investing SFA assets in other vehicles that are or have the
                nature of fixed income. These might include synthetic replications of
                fixed income securities, insurance contracts, hybrid securities,
                preferred stock or other vehicles. In this regard, the following
                questions are of interest:
                 What are the advantages of investing in such vehicles,
                relative to a portfolio of investment grade fixed income, in terms of
                expected returns, reduced risk or other improved outcomes?
                 What are the disadvantages of investing in such vehicles
                relative to a portfolio of investment grade fixed income, including
                lower returns, higher risk, inequitable outcomes amongst participants
                or other issues?
                 What are the implementation and management costs of
                investing in such vehicles?
                 Which organizations are qualified to manage and advise on
                these vehicles?
                 Can the vehicles, as they might be used in multiemployer
                plan portfolios or in the pool of SFA assets, be clearly defined and
                easily used?
                 (2) Should permissible investments of SFA assets be limited to
                fixed income securities? For instance, should the rule permit
                investment of a percentage of SFA assets in certain stock ETFs or
                mutual funds that have investment profiles that are not materially
                riskier than fixed income-based investment grade securities?
                 (3) What is the appropriate amount of SFA assets that may be
                permitted to be invested in non-investment grade securities?
                 (4) What is the proper relationship to restrictions on SFA asset
                investments to other plan asset allocations?
                Conditions for Special Financial Assistance
                 To ensure that SFA is used for the purpose of paying benefits and
                the expenses related to those benefit payments, section 4262(m)(1) of
                ERISA gives PBGC authority, in consultation with the Secretary of the
                Treasury, to impose reasonable conditions on an eligible multiemployer
                plan that receives SFA. Conditions may relate to increases in future
                accrual rates and any retroactive benefit improvements, allocation of
                plan assets, reductions in employer contribution rates, diversion of
                contributions to, and allocation of expenses to, other benefit plans,
                and withdrawal liability. In determining what conditions to impose, in
                consultation with the Treasury Department, PBGC considered, among other
                things, the potential actions of contributing employers and the
                security of the accrued benefits of plan participants. These
                considerations are discussed in greater detail in the regulatory impact
                analysis section of the rule.
                 Under certain circumstances, a plan sponsor may request approval
                from PBGC for an exception to conditions relating to reductions in
                employer contribution rates, transfers or mergers, and settlement of
                withdrawal liability. These exceptions are explained later in this
                section of the preamble. PBGC is soliciting public comment on whether
                there are other circumstances relating to the conditions described
                under Sec. 4262.16 where PBGC should consider providing approval for
                exceptions.
                (a) Benefit Increases
                 Section 4262.16(b) imposes reasonable conditions on a plan that
                receives SFA with respect to the types
                [[Page 36610]]
                of benefits and benefit increases described in section 4022A(b)(1) of
                ERISA, without regard to the time the benefit or benefit increase has
                been in effect. These conditions are intended to prevent excessive
                increases in benefits that would result in a transfer of SFA beyond the
                payment of benefits at the level that participants were promised as of
                the date of enactment of section 4262, without being overly
                restrictive. The condition does not apply to the required reinstatement
                of benefits suspended under sections 305(e)(9) or 4245(a) of ERISA or
                any restoration of benefits under 26 CFR 1.432(e)(9)-1(e)(3).
                 The condition in Sec. 4262.16(b)(1) restricts retrospective
                benefit increases by providing that a benefit or benefit increase must
                not be adopted during the SFA coverage period (defined in Sec. 4262.2
                of the regulation) if it is in whole or in part attributable to service
                accrued or other events occurring before the adoption date of the
                amendment. This condition is needed because retroactive increases in
                benefits harm the funded position of the plan without improving
                expected future plan income.
                 The condition in Sec. 4262.16(b)(2) restricts prospective benefit
                increases by providing that a benefit or benefit increase must not be
                adopted during the SFA coverage period unless the plan actuary
                certifies that employer contribution increases projected to be
                sufficient to pay for the benefit increase have been adopted or agreed
                to, provided that these increased contributions were not included in
                the determination of SFA. The plan sponsor must demonstrate that a
                benefit increase is paid for in the statement of compliance described
                under Sec. 4262.16(i). This condition is intended to guard against
                plans implementing significant benefit increases that may accelerate
                plan insolvencies and hasten an inability to pay plan-level benefits.
                However, plans still have the flexibility to offer active participants
                more attractive benefit accruals when the plan is able to afford them.
                 These conditions on benefit increases are in addition to the
                limitations under section 305(f)(1)(B) of ERISA (and corresponding
                section 432(f)(1)(B) of the Code) applicable to plans in critical
                status.
                (b) Allocation of Plan Assets
                 Section 4262.16(c) imposes a condition on a plan that receives SFA
                relating to the allocation of plan assets. This condition requires
                that, during the SFA coverage period, plan assets, including SFA, must
                be invested in permissible investments as described in Sec. 4262.14
                sufficient to pay for at least 1 year (or until the date the plan is
                projected to become insolvent, if earlier) of projected benefit
                payments and administrative expenses.
                 By imposing investment constraints on SFA assets in section 4262(l)
                of ERISA and providing PBGC the authority to impose additional
                constraints on asset allocation in section 4262(m), the statute
                contemplates a desire to prevent excessive risk-taking by plans that
                receive SFA. PBGC views the gradual increase in the proportion of
                assets allocated to fixed income as a plan approaches insolvency as a
                sensible and prudent approach to investing over a gradually shortening
                time horizon. However, PBGC is interested in whether this condition is
                seen as preventing plans from achieving reasonable investment
                objectives. PBGC encourages interested parties to respond, and provide
                supporting data, to the following questions:
                 Will the requirement to maintain 1 year (or until the date
                the plan is projected to become insolvent, if earlier) of benefit
                payments and administrative expenses in investment grade fixed income
                assets result in an allocation that is significantly different from the
                allocation that the plan's investment policy (after receiving SFA)
                would otherwise attain?
                 What are the advantages and disadvantages of PBGC not
                imposing any conditions under section 4262(m) of ERISA on asset
                allocation compared to the proposed condition requiring 1 year (or
                until the date the plan is projected to become insolvent, if earlier)
                of benefit payments and administrative expenses in investment grade
                fixed income?
                 Could an alternative condition, or modification of the
                condition under Sec. 4262.16(c), better achieve the objective of
                preventing excessive risk-taking by plans while allowing plans to meet
                their investment objectives?
                (c) Contribution Decreases, Allocating Contributions and Other
                Practices
                 Section 4262.16(d) of the regulation imposes reasonable conditions
                on a plan that receives SFA relating to contribution decreases to
                ensure that SFA is used for the exclusive purpose of paying benefits
                and reasonable administrative expenses and is not effectively
                transferred to contributing employers through decreased contribution
                obligations. Similarly, Sec. 4262.16(e) imposes reasonable conditions
                relating to allocation of income or expenses with another employee
                benefit plan and other practices.
                 For the condition on contribution decreases, Sec. 4262.16(d)
                provides that during the SFA coverage period, the contributions
                required for each CBU must not be less than, and the definition of the
                CBUs must not be different from, those set forth in collective
                bargaining agreements or plan documents in effect on March 11, 2021
                (including agreed to contribution rate increases through the expiration
                date of the collective bargaining agreements).
                 The regulation provides an exception to this condition where the
                plan sponsor determines that the risk of loss to plan participants and
                beneficiaries is lessened by the reduction. Where the reduction affects
                annual contributions over $10 million and over 10 percent of all
                employer contributions, PBGC must also determine that the change
                lessens the risk of loss to participants and beneficiaries. Information
                required to be submitted to PBGC for a request for approval of a
                proposed changed is described in Sec. 4262.16(d)(2). The exception is
                intended, for example, to allow a contributing employer to reduce
                contributions below collectively bargained rates so that the employer
                may continue in business and not be forced to withdraw in conjunction
                with a bankruptcy. This condition generally is intended to prevent
                reductions in contribution rates that may accelerate plan insolvencies,
                while providing limited flexibility for employers with extenuating
                financial circumstances.
                 With respect to the allocation of contributions and other practices
                during the SFA coverage period, Sec. 4262.16(e) prohibits a decrease
                in the proportion of income (contributions, investment returns, etc.)
                or an increase in the proportion of expenses allocated to a plan that
                receives SFA. This prohibition applies to written or oral agreements or
                practices (other than a written agreement in existence on March 11,
                2021, to the extent not subsequently amended or modified) under which
                income or expenses are divided or to be divided between a plan that
                receives SFA and one or more other employee benefit plans.
                 Among the practices covered by this prohibition is any allocation
                or reallocation of contribution rates from the plan receiving SFA to a
                newly formed pension plan. Similarly, plan expenses can be paid by a
                plan only if they are properly allocable to that plan. Accordingly,
                another prohibited practice is a change in the allocation of expenses
                with other benefit plans that serves to increase the proportion of
                expenses to be paid by the plan receiving SFA.
                 However, the prohibition under Sec. 4262.16(e) does not apply to a
                good faith allocation of contributions
                [[Page 36611]]
                pursuant to a reciprocity agreement. (If the principal purpose of
                entering into, amending, or modifying a reciprocity agreement after
                March 11, 2021, is to circumvent Sec. 4262.16(e), any allocation made
                pursuant to such reciprocity agreement will not be considered as made
                in good faith.) The prohibition also does not apply to a good faith
                allocation of contributions where the contributions to a plan that
                receives SFA required for each base unit are not reduced (except if the
                reduction is approved by PBGC). It also does not apply to a good faith
                allocation of the costs of securing shared space, goods, or services,
                where such allocation does not constitute a prohibited transaction
                under ERISA or is otherwise exempt from the prohibited transaction
                provisions pursuant to section 408(b)(2), 408(c)(2), or 408(a) of
                ERISA, or of the actual cost of services provided to the plan by an
                unrelated third party. As with the other conditions under Sec.
                4262.16, the condition under Sec. 4262.16(e) is intended to ensure
                that plans receiving SFA do not engage in transactions that may
                accelerate plan insolvency.
                (d) Transfers or Mergers
                 Section 4262.16(f) provides that during the SFA coverage period, a
                plan must not engage in a transfer of assets or liabilities (including
                a spinoff) or merger except with PBGC's approval. Notwithstanding
                anything to the contrary in PBGC's regulation on mergers and transfers
                between multiemployer plans (29 CFR part 4231), the plans involved in
                the transaction must request approval from PBGC. A request for approval
                must contain information that would be required to be submitted under
                Sec. 4231.10 and the additional actuarial and financial information
                described in Sec. 4262.16(f)(2). PBGC will approve a proposed transfer
                or merger if: (1) The transaction complies with section 4231(a)-(d) of
                ERISA, (2) the transfer or merger, or the larger transaction of which
                the transfer or merger is a part, does not unreasonably increase PBGC's
                risk of loss respecting any plan involved in the transaction, and (3)
                the transfer or merger is not reasonably expected to be adverse to the
                overall interests of the participants and beneficiaries of any of the
                plans involved in the transaction. An example of a larger transaction
                is where the trustees of a plan receiving SFA arrange a transfer of
                assets and liabilities from the plan and amend the plan to
                substantially or completely end benefit accruals in connection with the
                plan's active participants beginning to accrue benefits under another
                existing or newly formed plan.
                (e) Withdrawal Liability
                 Under sections 4201 through 4225 of ERISA, when a contributing
                employer withdraws from an underfunded multiemployer plan, the plan
                sponsor assesses withdrawal liability against the employer. Withdrawal
                liability represents a withdrawing employer's proportionate share of
                the plan's unfunded benefit obligations and is an important source of
                income for the plan. To assess withdrawal liability, the plan sponsor
                must determine the withdrawing employer's (1) allocable share of the
                plan's unfunded vested benefits (the value of nonforfeitable benefits
                that exceeds the value of plan assets) as of the end of the plan year
                before the employer's withdrawal as provided under section 4211, and
                (2) annual withdrawal liability payment as provided under section 4219.
                Under section 4219(c)(1), an employer's withdrawal liability may be
                reduced if the period required to amortize the liability exceeds 20
                years.
                 To preserve SFA for the payment of benefits and expenses and avoid
                an indirect transfer of SFA to a withdrawing employer by reducing the
                employer's withdrawal liability, in Sec. 4262.16 PBGC uses its
                authority under section 4262(m) of ERISA to place reasonable conditions
                relating to withdrawal liability on a plan that receives SFA. PBGC
                determined that a reasonable condition on a plan that receives SFA is
                to require specified interest assumptions to be used for purposes of
                determining withdrawal liability.\18\
                ---------------------------------------------------------------------------
                 \18\ PBGC intends to propose a separate rule of general
                applicability under section 4213(a) of ERISA to prescribe actuarial
                assumptions which may be used by a plan actuary in determining an
                employer's withdrawal liability.
                ---------------------------------------------------------------------------
                 Under Sec. 4262.16(g), for withdrawals that occur after the plan
                year in which the plan receives SFA, the interest assumptions used in
                determining unfunded vested benefits for purposes of determining
                withdrawal liability must be mass withdrawal interest assumptions under
                Sec. 4281.13(a) of PBGC's regulation on Duties of Plan Sponsor
                Following Mass Withdrawal (29 CFR part 4281). PBGC's interest
                assumptions used for mass withdrawal liability approximate the market
                price insurance companies charge to assume a pension-benefit-like
                liability. Using mass withdrawal interest assumptions for purposes of
                calculating withdrawal liability is reasonable because withdrawal
                liability is the final settlement of the withdrawing employer's
                obligation to pay for unfunded vested benefits. Doing so is
                particularly important for plans that have developed an adverse
                demographic structure, with a small contribution base relative to their
                unfunded vested benefits, which is the condition of many of the plans
                that are or will become eligible for SFA.
                 The prescribed interest assumptions must be used until the later of
                10 years after the end of the plan year in which the plan receives
                payment of SFA or the last day of the plan year in which the plan no
                longer holds SFA or any earnings thereon in a segregated account. The
                minimum 10-year period for using these required assumptions is similar
                to the time period for the special withdrawal liability rules for
                benefit suspensions under MPRA.
                 PBGC determined that these are reasonable conditions because SFA
                does not result from employer contributions, and, without such
                conditions, the receipt of SFA could substantially reduce withdrawal
                liability owed by a withdrawing employer. That could cause more
                withdrawals in the near future than if the plan did not receive SFA,
                which would reduce plan income and be an additional burden for these
                plans. Congress specified in section 4262 of ERISA that SFA and
                earnings thereon may be used by a plan to make benefit payments and pay
                plan expenses. Payment of SFA was not intended to reduce withdrawal
                liability or to make it easier for employers to withdraw.
                 In addition, under Sec. 4262.16(h) any settlement of withdrawal
                liability during the SFA coverage period must be made only with PBGC
                approval if the present value of the liability settled is greater than
                $50 million (calculated as described under Sec. 4262.16(h)(1)).
                Approval ensures that any negotiated settlements of material size are
                in the best interests of the participants in the plan, and do not
                create an unreasonable risk of loss to PBGC. The information required
                to be submitted for a request for approval of a proposed withdrawal
                liability settlement is under Sec. 4262.16(h)(3).
                (f) Reporting and Audit
                 In order to monitor compliance with the conditions imposed on plans
                that receive SFA, PBGC requires under Sec. 4262.16(i) that plan
                sponsors file with PBGC each plan year, beginning with the plan year
                after the payment of SFA and through the last day of the last plan year
                ending in 2051, a statement of compliance with the terms and conditions
                of SFA. The statement must be filed with PBGC no later than 90 days
                [[Page 36612]]
                after the end of the plan year and in accordance with the statement of
                compliance instructions on PBGC's website at www.pbgc.gov.
                 PBGC may conduct periodic audits of plans that have received SFA to
                review compliance with the terms and conditions of the SFA program.
                Reinstatement of Benefits Previously Suspended
                 Section 4262(k) of ERISA imposes two conditions on a plan that
                receives SFA and previously suspended benefits in accordance with
                sections 305(e)(9) or 4245(a) of ERISA. A plan must reinstate any
                benefits that were suspended and must provide payments to certain
                participants or beneficiaries to make up past amounts of benefits
                previously suspended.
                 As provided under section 4262(k) of ERISA,\19\ Sec. 4262.15
                requires plans to reinstate these previously suspended benefits as of
                the month in which SFA is paid, and to provide make-up payments with
                respect to the previously suspended benefits, in accordance with
                guidance issued by the Treasury Department and the IRS. This guidance
                has been issued as Notice 2021-38. Section 4262(k) and Sec. 4262.15
                give the plan sponsor flexibility to design payment of make-up amounts
                as a single lump sum within 3 months of the payment date of SFA, or in
                equal monthly installments over a period of 5 years, commencing within
                3 months of the payment date, with no installment payment adjusted for
                interest.
                ---------------------------------------------------------------------------
                 \19\ Section 4262(k) of ERISA contains rules that are parallel
                to section 432(k) of the Code. Under section 9704(d)(3) of ARP, the
                Secretary of the Treasury has interpretive jurisdiction over the
                rules for determining the benefit reinstatement and make-up payments
                that must be made by a multiemployer plan receiving SFA, for
                purposes of ERISA as well as the Code. Under section 4262(k), the
                Secretary of Labor, in coordination with Secretary of the Treasury,
                must ensure benefits are reinstated and previously suspended
                benefits paid.
                ---------------------------------------------------------------------------
                 The plan sponsor of a plan with benefits that were suspended under
                section 305(e)(9) or 4245(a) of ERISA is required in Sec. 4262.15(c)
                to furnish a notice of reinstatement to participants and beneficiaries
                whose benefits were previously suspended and then reinstated in
                accordance with section 4262(k) of ERISA. The requirements for the
                notice, including content requirements, are in notice of reinstatement
                instructions, in an addendum to the SFA application instructions,
                available on PBGC's website at www.pbgc.gov.
                 PBGC is providing for this notice of reinstatement so that
                participants and beneficiaries are adequately informed about the amount
                (and calculation) of reinstatement and make-up payments, taking into
                account any restoration of benefits under 26 CFR 1.432(e)(9)-1(e)(3),
                and know when to expect the reinstatement and make-up payments. The
                notice also informs participants and beneficiaries how to contact the
                Department of Labor if they need assistance in understanding their
                rights under the reinstatement process. The Department has advised that
                if participants and beneficiaries better understand the benefits they
                will be receiving as a result of the plan receiving SFA, it will help
                the Department meet its obligations under section 4262(k) of ERISA to
                ensure that suspended benefits are reinstated and make-up payments
                made.
                 Section 4262(k) of ERISA states that ``the Secretary, in
                coordination with the Secretary of the Treasury, shall ensure that an
                eligible multiemployer plan that receives special financial
                assistance'' reinstates suspended benefits and provides make-up
                payments required by the statute. The Department of Labor notes that it
                will need access to, and if requested, copies of records to ensure that
                plans receiving SFA reinstate the suspended benefits of participants
                and beneficiaries as required by section 4262(k). Plan fiduciaries have
                an obligation under title I of ERISA to maintain complete and accurate
                records, including information the Department may need to ensure the
                timely reinstatement of suspended benefits and payment of make-up
                payments under section 4262(k) of ERISA. The Department has advised
                that a plan's failure to maintain adequate and complete records could
                result in violations of sections 107, 209, and 404 of ERISA. The
                Department is considering issuing guidance to address the records and
                information that plans receiving SFA will need to maintain and retain
                to comply with title I of ERISA.
                Other Provisions
                 Section 4262 of ERISA contains other provisions that apply to SFA
                and plans receiving SFA. These provisions are enumerated under Sec.
                4262.17 of the regulation:
                 SFA must not be capped by the guarantee under section
                4022A of ERISA.
                 A plan receiving SFA is required to continue to pay
                premiums due under section 4007 of ERISA for participants and
                beneficiaries in the plan.
                 A plan that receives SFA is deemed to be in critical
                status within the meaning of section 305(b)(2) of ERISA until the last
                plan year ending in 2051.
                 A plan that receives SFA and subsequently becomes
                insolvent under section 4245 of ERISA will be subject to the rules and
                guarantee for insolvent plans in effect when the plan becomes
                insolvent.
                 A plan that receives SFA is not eligible to apply for a
                suspension of benefits under section 305(e)(9) of ERISA.
                 Section 4262.17 also provides that a plan that receives SFA and
                meets the eligibility requirements for partition of the plan under
                section 4233(b) of ERISA may apply for partition under section 4233.
                One of those requirements, in section 4233(b)(2), provides that a
                multiemployer plan is eligible for partition if ``the corporation
                determines, after consultation with the Participant and Plan Sponsor
                Advocate . . ., that the plan sponsor has taken (or is taking
                concurrently with an application for partition) all reasonable measures
                to avoid insolvency, including the maximum benefit suspensions under
                section 305(e)(9), if applicable[.]'' Section 4262(m)(6) provides that
                a plan that receives SFA is not eligible to apply for a subsequent
                suspension of benefits under MPRA. Therefore, for a plan that has
                received SFA, a suspension of benefits under section 305(e)(9) is not
                ``applicable'' within the meaning of section 4233(b)(2) and is not a
                reasonable measure available to the plan.
                 Finally, Sec. 4262.17 includes a severability provision that
                provides that if any of the provisions of this interim final rule are
                found to be invalid or stayed pending further agency action, the
                remaining portions of the rule would remain operative.
                Compliance With Rulemaking Guidelines
                Administrative Procedure Act
                 The Administrative Procedure Act at 5 U.S.C. 553(b) provides that
                notice and comment requirements do not apply when an agency, for good
                cause, finds that they are impracticable, unnecessary, or contrary to
                the public interest. An exception is also provided at 5 U.S.C.
                553(d)(3) to the requirement of a 30-day delay before the effective
                date of a rule ``for good cause found and published with the rule.''
                Section 9704 of the American Rescue Plan (ARP) Act of 2021 set up a
                ``Special Financial Assistance Program for Financially Troubled
                Multiemployer Plans.'' PBGC is issuing this rule without advance notice
                and public comment as an interim final rule to allow for immediate
                implementation of this program.
                 Under new section 4262(c) of ERISA, PBGC is mandated to issue
                regulations or guidance setting forth the
                [[Page 36613]]
                requirements for eligible plans to apply for special financial
                assistance (SFA) within a short 120 days of the date of enactment of
                ARP (March 11, 2021). Moreover, PBGC must review applications within
                only 120 days of filing and plans must apply by the statutory cutoff
                date of December 31, 2025 (December 31, 2026, for revised
                applications). The compressed timeline for issuing rules, applying for
                assistance, and processing applications expresses a clear urgency to
                get appropriate assistance to eligible plans as quickly as possible.
                 Underscoring that urgency, Congress authorized PBGC to prioritize
                the filing of applications for eligible plans with the greatest need,
                but only during the first 2 years after March 11, 2021. Recognizing
                that need, PBGC in this interim final rule is prioritizing applications
                of plans, including soon-to-be insolvent plans and already insolvent
                plans that previously suspended benefits of participants and
                beneficiaries--benefits that must be reinstated and restored through
                make-up payments as a requirement of receiving SFA. Any delay of the
                effective date of the rule would be contrary to the financial interests
                of the participants and beneficiaries in these plans. If financial
                assistance is delayed and plans become insolvent, benefits for
                participants and beneficiaries will be reduced. For plans already
                insolvent with participant benefits that were already reduced, any
                delay will result in participants and beneficiaries having to wait
                longer to have their benefits reinstated and to receive their make-up
                payments.
                 Furthermore, the interim final rule imposes reasonable conditions
                on eligible plans that receive SFA, as permitted under section
                4262(m)(1) of ERISA. PBGC finds good cause for making the conditions
                provided in the rule effective simultaneously with the application
                requirements. Plan sponsors need to know, before applying for SFA, what
                conditions will be imposed on the plan. The conditions may affect a
                plan sponsor's decision to apply for SFA or its determination of the
                amount of SFA. For example, the condition on withdrawal liability may
                affect the assumptions used to determine the amount of SFA in the
                plan's application. The conditions in the interim final rule are
                integral to the application requirements and decisions being made by
                plan sponsors, and, therefore, should be effective without delay.
                 Accordingly, because of the urgent need to get financial assistance
                to eligible plans as quickly as possible, PBGC has determined that
                prior notice and comment through the issuance of a notice of proposed
                rulemaking is impracticable and that the public interest is best served
                by issuing this interim final rule. Further, prior notice and comment
                is impracticable within the challenging statutory deadline under which
                PBGC must issue regulations to set forth requirements for special
                financial assistance applications, and within the limited statutory
                timeframe (already begun) in which PBGC has to prioritize the filing of
                applications of plans with the most urgent need for assistance.
                However, PBGC is requesting comments at the time this interim final
                rule is issued and may include changes in a final rule in response to
                those comments. For the same reasons discussed earlier, pursuant to 5
                U.S.C. 553(d)(3), PBGC is making this rule effective on July 12, 2021.
                Congressional Review Act
                 Pursuant to Subtitle E of the Small Business Regulatory Enforcement
                Fairness Act of 1996 (also known as the Congressional Review Act or
                CRA) (5 U.S.C. 801 et seq.), the Office of Management and Budget (OMB)
                has designated this interim final rule as a ``major rule,'' as defined
                by 5 U.S.C. 804(2)(a), which is a rule likely to result in an annual
                effect on the economy of $100 million or more. Section 808(2) of the
                CRA provides that, notwithstanding the effective date of a major rule
                defined under section 801, any rule which an agency for good cause
                finds that notice and public procedure thereon are impracticable,
                unnecessary, or contrary to the public interest, shall take effect at
                such time as the Federal agency promulgating the rule determines. This
                good cause justification supports waiver of the 60-day delayed
                effective date for major rules under the CRA.
                 As discussed earlier, because of the urgent need for the SFA
                program, PBGC has determined that this interim final rule must take
                effect on the date of publication. This immediate effective date is
                necessary based on the mandate of section 4262(c) of ERISA to issue
                regulations or guidance setting forth the requirements for SFA
                applications within 120 days of the date of enactment of ARP. This
                short statutory deadline is to allow eligible plans, particularly plans
                that are close to insolvency or already insolvent, to begin applying
                for much needed financial assistance. Under the circumstances, PBGC has
                determined that prior notice and comment through the issuance of a
                notice of proposed rulemaking is impracticable and that the public
                interest is best served by making this interim final rule effective on
                July 12, 2021. PBGC does not want to unduly delay providing financial
                assistance to plans.
                Regulatory Impact Analysis
                (1) Relevant Executive Orders for Regulatory Impact Analysis
                 Under Executive Order (E.O.) 12866, OMB reviews any regulation
                determined to be a ``significant regulatory action.'' Section 3(f) of
                E.O. 12866 defines a ``significant regulatory action'' as an action
                that is likely to result in a rule that: (1) Has an annual effect on
                the economy of $100 million or more, or adversely affects in a material
                way a sector of the economy, productivity, competition, jobs, the
                environment, public health or safety, or State, local or tribal
                governments or communities (also referred to as economically
                significant); (2) creates serious inconsistency or otherwise interferes
                with an action taken or planned by another agency; (3) materially
                alters the budgetary impacts of entitlement grants, user fees, or loan
                programs, or the rights and obligations of recipients thereof; or (4)
                raises novel legal or policy issues arising out of legal mandates, the
                President's priorities, or the principles set forth in the E.O.
                 OMB has determined that this interim final rule is economically
                significant under section 3(f)(1) and has therefore reviewed this rule
                under E.O. 12866.
                 E.O. 13563 supplements and reaffirms the principles, structures,
                and definitions governing contemporary regulatory review that were
                established in E.O. 12866, emphasizing the importance of quantifying
                both costs and benefits, reducing costs, harmonizing rules, and
                promoting flexibility. It directs agencies to assess the costs and
                benefits of available regulatory alternatives and, if regulation is
                necessary, to select regulatory approaches that maximize net benefits
                (including potential economic, environmental, and public health and
                safety effects, distributive impacts, and equity).
                 PBGC has provided an assessment of the potential benefits, costs,
                and transfers associated with this interim final rule.
                (2) Introduction and Need for Regulation
                 As discussed earlier in the preamble, section 9704 of the American
                Rescue Plan (ARP) Act of 2021, ``Special Financial Assistance Program
                for Financially Troubled Multiemployer Plans,'' establishes a new
                section 4262 of ERISA. To implement section 4262, this interim final
                rule adds to PBGC's
                [[Page 36614]]
                regulations a new part 4262 (Special Financial Assistance by PBGC). It
                is through this program that PBGC will provide special financial
                assistance (SFA) to eligible multiemployer pension plans from a fund
                established by ARP \20\ for SFA purposes and credited with transfers
                from the general fund of the Treasury Department.
                ---------------------------------------------------------------------------
                 \20\ Specifically, section 9704 of ARP establishes an eighth
                fund under section 4005 of ERISA.
                ---------------------------------------------------------------------------
                 Before the enactment of ARP on March 11, 2021, the Congressional
                Budget Office (CBO) projected the SFA program under section 4262 of
                ERISA to pay approximately $86 billion in total assistance to on
                average (across model simulations) 185 plans.\21\ PBGC has estimated
                the transfer amounts of the SFA program using ME-PIMS, PBGC's
                stochastic modeling tool, and projects the aggregate SFA to be
                approximately $94 billion in assistance payments to more than 200 plans
                and $150 million to PBGC to administer the SFA program. PBGC further
                estimates that plans that received financial assistance from PBGC under
                section 4261 of ERISA in the form of loans will repay PBGC in aggregate
                approximately $200 million.
                ---------------------------------------------------------------------------
                 \21\ Congressional Budget Office Cost Estimate, February 17,
                2021, https://www.cbo.gov/system/files/2021-02/hwaysandmeansreconciliation.pdf.
                ---------------------------------------------------------------------------
                 SFA is expected to assist plans covering more than 3 million
                participants, including by providing funds for make-up payments to
                restore previously suspended benefits that total approximately $150
                million for currently insolvent plans and approximately $550 million
                for plans that have adopted approved benefit suspensions under MPRA.
                Based on the average of 500 stochastic model simulations, ME-PIMS
                projects that over 100 plans that would have otherwise become insolvent
                during the next 15 years will instead forestall insolvency as a direct
                result of receiving SFA.
                 Section 4262(m) of ERISA provides PBGC with specific regulatory
                authority (in consultation with the Secretary of the Treasury) to
                impose reasonable conditions on eligible multiemployer plans that
                receive SFA (see Conditions for special financial assistance earlier in
                the preamble). Absent the imposition of any conditions, there would be
                a potential for employers and plan sponsors to take actions that could
                impair the financial health of their plans and thereby jeopardize the
                retirement security of plan participants and PBGC's multiemployer
                insurance program. Examples include actions that will increase plan
                obligations, such as amendments to increase benefit levels, or actions
                that could reduce future plan income, such as reductions to
                contribution rates or employer withdrawals. Each of these actions has
                the potential to accelerate plan insolvencies, which would bring about
                participant benefit cuts and increased future claims to PBGC's
                multiemployer insurance program that may impair PBGC's ability to pay
                financial assistance under section 4261.
                (3) Regulatory Action
                 PBGC strives to implement the SFA program established under this
                interim final rule in a manner that is consistent with the following
                key objectives: (1) To transfer to a plan the amount required under
                section 4262 of ERISA as soon as practicable; (2) to prioritize the
                applications of plans in imminent need of financial support and where
                participants' suspended benefits are to be restored; (3) to establish
                an efficient system for processing applications; and (4) to ensure
                prudent stewardship of taxpayer-funded appropriations for SFA,
                including the prevention of waste, fraud, and abuse in the SFA program.
                 Section 4262(m) of ERISA gives PBGC authority, in consultation with
                the Secretary of the Treasury, to impose reasonable conditions on an
                eligible multiemployer plan that receives SFA relating to increases in
                future accrual rates and any retroactive benefit improvements,
                allocation of plan assets, reductions in employer contribution rates,
                the allocation of contributions and other practices, and withdrawal
                liability. In determining what conditions to impose, in consultation
                with the Treasury Department, PBGC evaluated the regulatory
                alternatives under section 4262(m) to set conditions based on the
                following objectives: (1) Meeting the goals of ARP in providing for the
                SFA program; (2) stewardship of taxpayer-funded appropriations for SFA;
                (3) maintaining the security of the accrued pension benefits (current
                and future accruals) of participants in plans that receive SFA; and (4)
                preservation of the solvency of the PBGC multiemployer insurance
                program.
                 The regulatory action and related economic considerations for each
                condition are described as follows.
                Conditions Related to Future Benefit Accruals
                 The interim final rule provides that, during the SFA coverage
                period (beginning on the plan's SFA measurement date through the last
                day of the last plan year ending in 2051), plans that receive SFA can
                only accept a collective bargaining agreement (CBA) that increases
                future benefit accruals unless the plan actuary certifies that employer
                contribution increases projected to be sufficient to pay for the
                benefit increase have been adopted or agreed to, and provided that such
                increased contributions were not included in the determination of SFA.
                 Plans in critical status are already subject to constraints on
                increasing future benefit accrual levels. Under section 305(f)(1) of
                ERISA, they must be able to fund any benefit improvements using
                contributions that are not already contemplated within their
                rehabilitation plans.
                 The interim final rule similarly would prohibit plans from
                implementing significant benefit increases that likely could accelerate
                insolvencies after receiving taxpayer-funded assistance. However, it is
                evident that attracting and retaining active members to these
                financially troubled plans is critical to ensuring that the plans
                retain contribution income levels sufficient to sustain plan assets.
                Accordingly, the interim final rule allows plans to provide benefit
                increases when these increases can be paid for by additional employer
                contributions. The condition also does not apply to the required
                reinstatement of benefits suspended under section 305(e)(9) or 4245(a)
                of ERISA or to any restoration of benefits under 26 CFR 1.432(e)(9)-
                1(e)(3).
                Conditions Related to Retroactive Benefit Improvements
                 The interim final rule provides that, during the SFA coverage
                period, plans that receive SFA are strictly prohibited from adopting an
                amendment to provide any retroactive benefit improvements. Unlike
                increases to the level of future accruals, which incentivize active
                members to participate in the plan and can thereby improve the expected
                contribution income, increases to retroactive benefit levels harm the
                funded position of the plan without improving expected future plan
                income.
                Conditions Related to Allocation of Plan Assets
                 The interim final rule provides that, during the SFA coverage
                period, plans must hold a sufficient portion of total plan assets,
                which includes all segregated accounts (including SFA), in permissible
                investments (described in Sec. 4262.14) to meet expected plan benefit
                payments and administrative expenses for at least 1 year (or until the
                date the plan is projected to become insolvent, if earlier). This
                requirement is in addition to the restrictions on investments under
                Sec. 4262.14. For plans with a large proportion of plan assets as SFA,
                this additional condition is not likely to
                [[Page 36615]]
                result in any additional restrictions on asset allocation until the
                plan's SFA account is depleted.
                 The interim final rule provides plans that receive SFA with the
                opportunity to invest in a portfolio that can benefit from risk and
                illiquidity premiums over the long-term investment horizon. This
                flexibility to invest in other assets is likely to extend the solvency
                of these plans, and the limit on that flexibility will only constrain
                plans that would otherwise accept an inappropriate level of risk after
                receiving taxpayer assistance.
                Conditions Related to Reductions in Employer Contribution Rates
                 The interim final rule provides that, during the SFA coverage
                period, the contributions required for each CBU must not be less than,
                and the definition of the CBUs used must not be different from, those
                set forth in the CBA or plan documents (including agreed to
                contribution increases to the end of the collective bargaining
                agreements) in effect on March 11, 2021. However, an exception is
                provided where a plan sponsor determines that the risk of loss to plan
                participants and beneficiaries is lessened by the reduction. Where the
                reduction affects annual contributions over $10 million and over 10
                percent of all employer contributions, the plan sponsor must request
                approval from PBGC, which must also determine that the change lessens
                the risk of loss to participants and beneficiaries. Plans in critical
                status are already subject to constraints on reducing future
                contribution rates and must abide by the terms of their rehabilitation
                plans. The interim final rule is intended to broadly prevent reductions
                in contribution rates that may accelerate the future insolvencies of
                plans, while still providing very limited flexibility for employers
                with extenuating financial circumstances.
                Conditions Related to the Allocation of Contributions and Other
                Practices
                 Under the interim final rule, during the SFA coverage period, a
                decrease in the proportion of income (contributions, investment
                returns, etc.) or an increase in the proportion of expenses allocated
                to a plan that receives SFA is prohibited. This prohibition applies to
                written or oral agreements or practices (other than a written agreement
                in existence on March 11, 2021, to the extent not subsequently amended
                or modified) under which income or expenses are divided or to be
                divided between a plan that receives SFA and one or more other employee
                benefit plans. However, the prohibition does not apply to a good faith
                allocation of contributions pursuant to a reciprocity agreement. (If
                the principal purpose of entering into, amending, or modifying a
                reciprocity agreement after March 11, 2021, is to circumvent this
                condition, any allocation made pursuant to such reciprocity agreement
                will not be considered as made in good faith.) The prohibition also
                does not apply to a good faith allocation of contributions where the
                contributions to a plan that receives SFA required for each base unit
                are not reduced (except if the reduction is approved by PBGC). It also
                does not apply to a good faith allocation of the costs of securing
                shared space, goods, or services, where such allocation does not
                constitute a prohibited transaction under ERISA or is otherwise exempt
                from the prohibited transaction provisions pursuant to section
                408(b)(2), 408(c)(2), or 408(a) of ERISA, or of the actual cost of
                services provided to the plan by an unrelated third party.
                 This condition is to ensure that plans do not inappropriately
                reallocate contributions away from the plan to other benefit programs
                or inappropriately reallocate expenses from other benefit programs to
                the plan.
                 In addition, during the SFA coverage period, a plan receiving SFA
                must not engage in a transfer of assets or liabilities (including a
                spinoff) or merger except with PBGC's approval. PBGC will approve a
                proposed transfer or merger if: (1) The transaction complies with
                section 4231(a)-(d), (2) the transfer or merger, or the larger
                transaction of which the transfer or merger is a part, does not
                unreasonably increase PBGC's risk of loss respecting any plan involved
                in the transaction and (3) the transfer or merger is not reasonably
                expected to be adverse to the overall interests of the participants and
                beneficiaries of any of the plans involved in the transaction.
                 This condition is to ensure that plans that receive taxpayer-funded
                assistance do not subsequently engage in transactions that may allocate
                contributions away from the plan in a manner that is projected to
                accelerate insolvency.
                Conditions Related to Withdrawal Liability
                 Under the interim final rule, a plan must use the interest
                assumptions under Sec. 4281.13(a) to determine withdrawal liability
                beginning for withdrawals after the plan year in which the plan
                receives SFA. This condition continues to apply until the later of 10
                years after the end of the plan year in which the plan receives payment
                of SFA or the last day of the plan year in which the segregated SFA
                asset account is fully depleted.
                 The interim final rule also provides that, during the SFA coverage
                period, plans that receive SFA cannot enter into a negotiated
                settlement agreement with a withdrawing employer that is in excess of
                $50 million without first obtaining approval from PBGC. It is important
                to ensure that any negotiated settlements of material size are not
                projected to be harmful to participants in the plan or harmful to
                PBGC's multiemployer insurance program.
                 The interim final rule would prevent the payment of SFA from
                resulting in decreases in withdrawal liability assessments and thereby
                reduce the incentive for employers to withdraw from these plans. The
                purpose of SFA is to help plans pay for benefits and plan expenses and
                not to indirectly subsidize employers to exit these plans.
                (4) Estimated Impact of Regulatory Action
                 The following table summarizes the estimated transfers and costs
                expected as a result of implementation of the SFA program.
                ---------------------------------------------------------------------------
                 \22\ SFA payments to plans are expected to be $474 million in
                2027 and $0 thereafter. PBGC administrative expenses are expected to
                be $14 million per year from 2027 through 2029 and $10.5 million in
                2030. Additional PBGC expenses are expected to be incurred from 2031
                through 2051, but would not be funded through general
                appropriations. Annual compliance filings are expected to be
                $726,800 per year from 2027 through 2051. Condition exemption
                filings are expected to be $19,600 per year from 2027 through 2051.
                ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                 PV amount (3% PV amount (7% 2027-2051
                 rate) rate) 2021 2022 2023 2024 2025 2026 (Total) 22
                ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                 Annual Transfer Amounts
                ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                SFA payments to plans (total $86.35 billion.. $77.33 billion.. $1.46 billion... $43.68 billion.. $23.03 billion.. $13.32 billion.. $8.89 billion... $3.33 billion... $0.47 billion.
                 nominal value of $94.2
                 billion).
                [[Page 36616]]
                
                Financial assistance loan ($194.17) ($186.92) ($200.00) $0.............. $0.............. $0.............. $0.............. $0.............. $0.
                 repayment to PBGC (total million. million. million.
                 nominal value of $200
                 million).
                 Total transfer amounts $86.16 billion.. $77.14 billion.. $1.26 billion... $43.68 billion.. $23.03 billion.. $13.32 billion.. $8.89 billion... $3.33 billion... $0.47 billion.
                 (total nominal value of
                 $94.0 billion).
                ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                 Annual Cost Amounts
                ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                PBGC administrative expenses $129.57 million. $108.41 million. $20.50 million.. $17.50 million.. $15.75 million.. $15.00 million.. $14.75 million.. $14.00 million.. $52.50 million.
                 (total nominal value of $150
                 million).
                SFA applications.............. $8,091,600...... $7,232,400...... $1,199,300...... $2,121,800...... $2,183,300...... $1,998,800...... $1,260,800...... $78,800......... $0.
                Benefit reinstatement $69,900......... $66,000......... $34,400......... $38,700......... $0.............. $0.............. $0.............. $0.............. $0.
                 participant notices.
                Annual compliance filings..... $12,495,000..... $7,231,200...... $0.............. $99,500......... $275,400........ $456,500........ $622,200........ $726,800........ $18,168,750.
                Condition exemption filings... $354,000........ $209,900........ $0.............. $0.............. $19,600......... $19,600......... $19,600......... $19,600......... $489,250.
                 Total cost amounts........ $150.58 million. $123.15 million. $21.73 million.. $19.76 million.. $18.23 million.. $17.47 million.. $16.65 million.. $14.83 million.. $71.16 million.
                ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                Filing and Issuance Requirements
                 As discussed in this interim final rule, to request SFA for a
                multiemployer plan, a plan sponsor must, under section 4262 of ERISA
                and part 4262, file an application with PBGC. The applications for SFA
                must include information about the plan, plan documentation, and
                actuarial information. The information is necessary for PBGC to verify
                a plan's eligibility for SFA, amount of requested SFA, and if
                applicable, inclusion in a priority group. In addition, under part
                4262, a plan that has received SFA is required to file a compliance
                notice with PBGC once every year until 2051. As discussed further in
                the Paperwork Reduction Act section, the estimated average cost (dollar
                equivalent of the in-house hour burden + contractor costs) to prepare
                the one-time application to PBGC is $30,750, and the estimated average
                cost to prepare the annual statement of compliance is $2,550. PBGC
                estimates that over the next 3 years (2021-2023) it will receive
                annually an average of 60 applications for SFA at an aggregate average
                annual cost of $1,845,000 and 49 annual statements of compliance at an
                aggregate average annual cost of $124,950.
                 In addition, certain plan sponsors that receive SFA are subject to
                participant disclosure and reporting requirements. A plan sponsor of a
                plan with benefits that were suspended under sections 305(e)(9) or
                4245(a) of ERISA must issue a notice of reinstatement to participants
                and beneficiaries whose benefits were previously suspended and then
                reinstated. PBGC estimates that over the next 3 years (2021-2023) an
                average of 11.33 plans annually (34 total plans) will issue the notice
                of reinstatement to an average of 3,050 participants and beneficiaries
                at an aggregate average annual cost of $24,367.
                 A plan sponsor that receives SFA also is required to administer the
                plan in accordance with conditions prescribed by PBGC in Sec. 4262.16.
                A plan sponsor may request approval from PBGC for an exception under
                certain circumstances for conditions relating to reductions in
                contributions, transfers or mergers, and settlement of withdrawal
                liability. PBGC expects these determination requests to be infrequent.
                PBGC estimates that it will receive an average of 2.2 requests per year
                beginning in 2023 at a cost of $19,570 per year (averaged over 2021-
                2023 = $6,523).
                 Over the next 3 years (2021-2023), the total average annual cost
                for the information collection is $2,000,840 ($1,845,000 + $124,950 +
                $24,367 + $6,523).
                Conditions for Plans That Receive SFA
                 The following table provides estimated financial impacts under a
                benchmark scenario analysis for each of the 6 areas for conditions
                listed under section 4262(m)(1) of ERISA. The estimated results were
                produced by ME-PIMS, PBGC's stochastic modeling tool used to project
                the future solvency and potential financial assistance under section
                4261 for each plan in the U.S. multiemployer pension plan system.\23\
                The level of complexity and the lack of availability of complete plan-
                level data needed to program the specifications under the range of
                alternative regulatory actions under section 4262(m) are barriers to
                producing precise financial estimates for each potential action.
                Instead, PBGC conducted a single benchmark scenario for each regulatory
                condition that illustrates the order-of-magnitude financial impact.
                ---------------------------------------------------------------------------
                 \23\ The following web page on PBGC's website provides more
                detailed information about PBGC's Multiemployer Program Pension
                Insurance Modeling System (ME-PIMS): https://www.pbgc.gov/about/projections-report/pension-insurance-modeling-system.
                ---------------------------------------------------------------------------
                 The baseline assumptions represent PBGC's best-estimate assumptions
                for determining the aggregate amounts of SFA under section 4262 of
                ERISA and financial assistance under section 4261 based on employer and
                plan behavior that remains consistent before and following the
                distribution of SFA. The benchmark scenario assumptions represent a
                single scenario that was used to estimate each alternative regulatory
                action that was considered.
                [[Page 36617]]
                ----------------------------------------------------------------------------------------------------------------
                 Baseline Benchmark scenario Estimated
                 Regulatory condition assumption assumption benchmark impact * Comments
                ----------------------------------------------------------------------------------------------------------------
                Future Benefit Accruals......... No assumed accrual An immediate 10% $5 billion to $8 Plans are already
                 increases. increase in billion in constrained on
                 future accruals section 4261 increasing
                 followed by Financial accrual levels
                 annual increases Assistance based on
                 based on assumed (estimated rehabilitation
                 wage index through 2070). plan
                 increases (no requirements. The
                 corresponding estimated impact
                 contribution rate is primarily due
                 increases). to accelerated
                 plan
                 insolvencies.
                 Most increases to
                 benefit accrual
                 rates would not
                 be covered under
                 PBGC guaranteed
                 benefit limits.
                Retroactive Benefit Accruals.... No assumed accrual A one-time 10% $7 billion to $10 Plans are already
                 increases. increase in billion in constrained on
                 retroactive section 4261 increasing
                 accrued benefits Financial benefit levels
                 for all active Assistance based on
                 participants (estimated rehabilitation
                 increases (no through 2070). plan
                 corresponding requirements. The
                 contribution rate estimated impact
                 increases). is primarily due
                 to accelerated
                 plan
                 insolvencies.
                 Most increases to
                 accrued benefits
                 would not be
                 covered under
                 PBGC guaranteed
                 benefit limits.
                Allocation of Plan Assets....... Baseline All plans that $5 billion to $15 Plans required to
                 stochastic receive SFA billion in invest all
                 returns under ME- utilize an LDI section 4261 available plan
                 PIMS model, strategy to match Financial assets in high
                 without assets to benefit Assistance quality fixed
                 restrictions on payments. (estimated income securities
                 asset allocation. through 2070). are expected to
                 attain lower
                 investment
                 returns, which
                 accelerates plan
                 insolvencies.
                Reduction in Contribution Rates. Level contribution A one-time 20% $20 billion to $40 The estimated
                 rates (no assumed decrease in the billion in impact includes
                 decreases). per-capita section 4261 the acceleration
                 contribution rate Financial of projected plan
                 increases (no Assistance insolvencies
                 corresponding (estimated resulting from
                 reduction in through 2070). reduced
                 future accruals). contribution
                 levels, as well
                 as lower
                 contribution and
                 withdrawal
                 liability income
                 following
                 insolvency used
                 to partially
                 offset benefit
                 payments.
                Allocation of Contributions and No assumed A one-time $10 billion to $25 Reallocation of
                 Other Practices. reallocation of immediate decline billion in contributions to
                 contributions to to CBUs of 20%, section 4261 other plans could
                 other plans. CBUs followed by Financial take the form of
                 projected with annual 1.3% Assistance plan transactions
                 annual 1.3% declines (estimated such as spinoffs
                 decline. (includes through 2070). or liability
                 corresponding transfers, which
                 reduction in are not
                 future accruals). explicitly
                 modeled.
                Withdrawal Liability............ No assumed future Employers $15 billion to $20 Plans are assumed
                 employer representing 35% billion in to project the
                 withdrawals of active members section 4262 SFA. increased level
                 explicitly withdraw of employer
                 factored into immediately after withdrawals as
                 modeling. receiving SFA. part of
                 assumption
                 setting for SFA
                 determination
                 purposes.
                ----------------------------------------------------------------------------------------------------------------
                * The estimated impacts that increase the $94 billion of SFA amounts under section 4262 of ERISA occur from 2021
                 through 2027. The estimated impacts for all ``Section 4261 Financial Assistance'' represent the aggregate
                 nominal amount of this assistance provided through 2070. ``Section 4261 Financial Assistance'' is the
                 multiemployer insurance program financial assistance PBGC provides in periodic payments upon plan insolvency
                 under section 4261 of ERISA, which is limited to PBGC guarantee amounts.
                (5) Regulatory Alternatives Considered
                Conditions Related to Future Benefit Accruals
                 PBGC first considered the implications of foregoing any regulatory
                authority provided under section 4262(m) of ERISA to impose reasonable
                conditions related to future benefit accruals. The primary factor in
                support of the option to not regulate is that additional constraints on
                benefit improvements may be unnecessary and may be considered onerous.
                Plans that receive SFA will be deemed to be in critical status through
                the plan year ending in 2051 and will be subject to the terms of their
                applicable rehabilitation plan. A rehabilitation plan generally
                restricts a plan from increasing benefits unless the plan is able to
                provide additional contribution income that is not already contemplated
                with the rehabilitation plan.
                 Although this may be applicable for many plans, there may be
                additional benefits to imposing a secondary restriction on benefit
                increases as permitted under section 4262(m) of ERISA. A secondary
                condition may eliminate some existing flexibility but could prevent
                plans from adopting benefit improvements that prove ultimately to be
                unaffordable for the plan. If a plan that receives SFA were able to
                subsequently implement significant increases to the future accrual
                rate, it would likely accelerate the plan's insolvency date which would
                jeopardize participant benefits and impose financial strain on PBGC's
                multiemployer insurance program.
                 PBGC estimates that a one-time 10 percent increase in the future
                accrual rate accompanied by annual increases based on the national
                average wage index, for all active participants, could increase the
                aggregate nominal amount of future financial assistance under section
                4261 of ERISA by approximately $5 billion to $8 billion. Absent
                regulatory action, it is unknown the extent to which employers can and
                would increase future accrual rates. PBGC would generally expect the
                financial impact to be less than this estimated range due to the
                existing rehabilitation plan constraints, but the true impact is
                unknown and subject to a great deal of uncertainty.
                 Another regulatory alternative was considered under which PBGC
                would limit levels of future increases based on wage indexation. This
                alternative would allow plans with limited flexibility to adopt
                increases but would prevent significant improvements that may prove
                unaffordable. PBGC considered that certain eligible plans may have
                recently imposed substantial reductions in the accrual level to
                forestall insolvency, such that the current level of accruals are not
                sufficient to retain active members. Although this alternative would
                have helped to limit the financial impact below the $5 billion to $8
                billion range modeled in the sensitivity scenario, it was determined to
                be too restrictive.
                 Yet another regulatory alternative was considered under which PBGC
                would strictly prohibit any increases in future benefit accruals until
                2051. Under this approach, the value of plan accrual rates could erode
                significantly due to inflation. As the benefits lose value, it would
                likely become increasingly
                [[Page 36618]]
                difficult for plans to retain their active members. Plans could suffer
                irreparable harm to the contribution base as a result, which would
                likely guarantee that plans would go insolvent. As a result, PBGC
                determined that this regulatory alternative would harm plan
                participants and the multiemployer insurance program.
                Conditions Related to Retroactive Benefit Improvements
                 PBGC first considered the implication of foregoing any regulatory
                authority provided under section 4262(m) of ERISA to impose reasonable
                conditions related to retroactive benefit improvements. The primary
                support for not regulating is that additional constraints on benefit
                improvements may be unnecessary and may be considered onerous. Plans
                that receive SFA are deemed to be in critical status through the plan
                year ending in 2051 and will be subject to the terms of their
                applicable rehabilitation plan. A rehabilitation plan generally
                restricts a plan from increasing benefits unless the plan is able to
                provide additional contribution income that is not already contemplated
                with the rehabilitation plan.
                 However, as with the advantages of a condition on future benefit
                accruals discussed earlier, a secondary condition on retroactive
                benefit increases could prevent plans from adopting benefit
                improvements that ultimately prove to be unaffordable for the plan.
                PBGC estimates that a one-time 10 percent increase in retroactive
                accrued benefits for all active participants could increase the
                aggregate nominal amount of future financial assistance under section
                4261 by approximately $7 billion to $10 billion. Absent regulatory
                action, the extent to which employers can and would increase
                retroactive benefits is unknown. PBGC would generally expect the
                financial impact to be less than this estimated range due to existing
                rehabilitation plan constraints, but the true impact is unknown and
                subject to a great deal of uncertainty.
                 Another regulatory alternative considered would allow for
                retroactive benefit improvements, subject to rehabilitation plan
                constraints, but only up to a specified limit. The alternative would
                provide plans with limited flexibility to increase benefits, but also
                prevent excessive improvements that would impair a plan's financial
                position. Yet another alternative would be to limit the amount of
                retroactive benefit increases to a restoration of accrued benefits to
                levels available before reductions applied pursuant to rehabilitation
                plan requirements in recent years. The benefit of this approach would
                be to improve potentially the retirement security of active plan
                participants, who have experienced the disproportionate impact of
                benefit reductions. However, increases to future accrual rates more
                effectively bolster the future engagement of active participants than
                retroactive benefit improvements. By prohibiting all retroactive
                benefit improvements, plans will remain on a more favorable financial
                path and any surplus income would be better utilized by improving
                future accruals to help attract and retain active members.
                Conditions Related to Allocation of Plan Assets
                 PBGC first considered the implications of foregoing any regulatory
                authority provided under section 4262(m) of ERISA to impose reasonable
                conditions related to asset allocation. There were two primary factors
                in support of this approach. First, section 4262(l) already restricts
                the investment of SFA to investment-grade bonds and other investments
                as permitted by PBGC. This condition alone serves as a significant
                constraint on a plan's ability to pursue higher returns in risk-seeking
                assets, particularly for plans that had previously been insolvent or
                close to insolvency and received an amount of SFA that is large in
                proportion to the amount of existing plan assets. Second, imposing
                conditions that severely restrict the level of return-seeking assets
                may impair a plan's ability to achieve greater investment returns and
                forestall insolvency. Although a higher proportion of return-seeking
                assets exposes plans to greater losses in the event of adverse market
                conditions, the long-term investment horizon affords plans the risk
                capacity to recoup these losses.
                 The primary risk to foregoing any regulatory action to impose
                conditions on asset allocation is the potential for a scenario under
                which plans that receive SFA invest heavily in highly risky,
                speculative assets and the market experiences a severe, prolonged
                downturn. Plans may choose to pay all benefits and administrative
                expenses from the SFA account before exhausting any existing plan
                assets. Following the depletion of SFA, plans would then experience no
                constraints on their asset allocation and could seek to invest in
                highly risky assets. Although the long-term investment horizon does
                afford plans with time to recoup losses, a severe and prolonged
                downturn could cause irreparable harm to the plan's financial position.
                PBGC is unable to measure a precise financial impact for foregoing any
                regulatory condition with respect to asset allocation. However, under
                most economic scenarios, PBGC expects a more favorable outcome both to
                plan solvencies and future PBGC program outlays by imposing less
                restrictive conditions related to asset allocation, such as the
                condition in the interim final rule.
                 A separate regulatory alternative was considered under which PBGC
                would require all plan assets to be invested in accordance with the
                restrictions for SFA under section 4262(l) of ERISA (i.e., investment-
                grade bonds or other investments as permitted by PBGC). This condition
                would effectively require plans to pursue a liability-driven investment
                strategy under which fixed income assets are matched to expected
                benefit payments to immunize the portfolio from risk. This condition
                would be highly restrictive on a plan's ability to select plan assets.
                It would mitigate year-to-year volatility in plan funded status and
                would severely restrict a plan's attainable investment returns and thus
                potentially accelerate the insolvency of the plan. Because available
                fixed income yields are expected to be lower than the interest rate
                limit defined under section 4262(e)(3), plans would generally become
                insolvent before the 2051 plan year. Based on modeling using ME-PIMS,
                PBGC estimates that this regulatory alternative could increase future
                financial assistance payments under section 4261 by $5 billion to $15
                billion over the next four decades. Due to the increased financial
                impact of this option and the adverse impact to plan participants
                resulting from accelerated plan insolvencies, PBGC did not choose to
                pursue this alternative.
                Conditions Related to Reductions in Employer Contribution Rates
                 PBGC first considered the implications of foregoing any regulatory
                authority provided under section 4262(m) of ERISA to impose reasonable
                conditions related to reductions in employer contribution rates. The
                primary benefit of this option is that it could provide plans with
                flexibility to reduce contribution rates if it is expected to attract
                or retain employers in the plan. Any mechanism that allows plans to
                bolster their active membership could help to improve their funded
                status through increased contribution levels. A plan's authority to
                allow for reduced contribution rates during the collective bargaining
                process is already constrained by the terms of their rehabilitation
                plan, which is mandated for plans certified in critical status.
                However, if plans are able to allow for
                [[Page 36619]]
                reductions in employer contribution rates, the contribution income into
                the plan may decrease if the reduced rates do not effectively increase
                plan participation. Plans may view SFA as a windfall that will allow
                for contribution rate relief that benefits employers at the expense of
                the plan's financial health. Although the financial impact is likely to
                be significantly less than the $23 billion to $36 billion range
                estimated under the ME-PIMS benchmark scenario for a 20 percent
                universal reduction in assumed contribution rates (primarily due to the
                aforementioned rehabilitation plan constraints), PBGC expects there to
                be a material (albeit unknown) impact.
                 A separate regulatory alternative was considered under which PBGC
                would strictly prohibit plans from accepting any collective bargaining
                agreement under which there was a reduction in the contribution rate.
                This alternative is similar to the provision in the interim final rule
                but does not allow for any exceptions to the prohibition. PBGC
                recognizes that employers that are on the brink of insolvency may be
                able to avoid bankruptcy by reducing the contribution rate to the
                pension plan. Although this exception reduces short term contribution
                income to the plan, it may increase long-term contribution levels by
                enabling the contributing employer to stay solvent and have the
                resources available to contribute to the plan.
                Conditions Related to the Allocation of Contributions and Other
                Practices
                 PBGC considered the implications of foregoing any regulatory action
                under section 4262(m) of ERISA to impose reasonable conditions related
                to the allocation of contributions and other practices. The primary
                benefit of this option is that the bargaining parties would retain full
                discretion over how to allocate contributions to benefit programs that
                align with their desired preferences. Regulatory action by PBGC could
                be considered onerous.
                 However, PBGC recognizes that absent any regulations the bargaining
                parties could take actions that allocate contributions away from the
                pension plan and allow it to fail and become covered under PBGC's
                insurance program. PBGC used ME-PIMS to estimate the financial impact
                of a 25 percent one-time reduction in CBUs for all plans that receive
                SFA. This would reflect the efforts that may be made by some plans to
                shift hours away from the plan to increase contribution allocations to
                other programs. The 25 percent reduction percentage was set as an
                average to reflect that some bargaining parties may not allocate any
                contributions away from the plan whereas other bargaining parties may
                allocate a substantive portion of contributions away from the plan.
                Under this benchmark scenario, financial assistance under section 4261
                of ERISA would increase by approximately $10 billion to $25 billion
                over the following decades. However, the extent to which bargaining
                parties would engage in these types of strategies is highly uncertain.
                Conditions Related to Withdrawal Liability
                 PBGC first considered the implications of foregoing any regulatory
                authority provided under section 4262(m) of ERISA to impose reasonable
                conditions related to withdrawal liability. Absent any conditions,
                plans may anticipate a potential surge of employer withdrawal upon
                receipt of the SFA. Plans would account for this anticipated outcome by
                requesting a greater amount of SFA in their applications to PBGC (plans
                would do so by setting the actuarial assumptions accordingly). The
                extent to which the aggregate amount of SFA provided under section 4262
                is impacted is unknown, but PBGC estimates that it could range from 10%
                to 30%. The greater the amount of SFA that is provided to plans, the
                greater the reduction in the employers' unfunded vested benefit
                obligations and therefore the greater the incentive for employers to
                withdraw from the plans. This outcome could materially increase the
                amounts of SFA provided under section 4262.
                 A separate regulatory alternative was considered under which PBGC
                would mandate that, during the SFA coverage period, SFA assets are
                disregarded in the determination of unfunded vested benefits for the
                assessment of withdrawal liability. This alternative would prevent a
                decrease in the value of employer unfunded benefit obligations due to
                receipt of SFA and thereby block an incentive from arising that may
                cause employers to withdraw from these plans. This would mitigate
                against a change in plan assumptions for increased employer withdrawals
                within the application for SFA that would in turn increase the
                aggregate transfers of SFA across all plans under section 4262. This
                alternative was determined to be more administratively complex and
                therefore less desirable.
                Regulatory Flexibility Act
                 Because PBGC is not publishing a general notice of proposed
                rulemaking under 5 U.S.C. 553(b), the regulatory flexibility analysis
                requirements of the Regulatory Flexibility Act do not apply. See 5
                U.S.C. 601(2).
                Paperwork Reduction Act
                 This interim final rule contains a collection of information that
                PBGC has submitted to the Office of Management and Budget (OMB) for
                review and approval under the Paperwork Reduction Act. OMB's decision
                regarding this information collection request will be available at
                http://www.Reginfo.gov. An agency may not conduct or sponsor, and a
                person is not required to respond to, a collection of information
                unless it displays a currently valid OMB control number.
                 PBGC estimates that over the next 3 years an annual average of 60
                plan sponsors will file applications for SFA (39 in 2021, 69 in 2022,
                and 71 in 2023). PBGC needs the information in the application to
                review a plan's eligibility for SFA, priority group status, and amount
                of requested SFA, and to make payment of SFA. PBGC estimates that each
                application requires $30,000 in contractor cost and 10 hours of in-
                house fund time. Thus, the application imposes estimated annual burdens
                of $1,800,000 (60 x $30,000) and 600 (60 x 10) hours.
                 PBGC estimates that over the next 3 years an annual average of 49
                plan sponsors will file Annual Statements of Compliance (0 in 2021, 39
                in 2022, and 108 in 2023). PBGC needs the information in this statement
                to ensure that a plan is compliant with the conditions imposed upon its
                receiving SFA. PBGC estimates that each Annual Statement of Compliance
                requires $2,400 in contractor cost and 2 hours of in-house fund time.
                The Annual Statement of Compliance imposes estimated annual burdens of
                $117,600 (49 x $2,400) and 98 (49 x 2) hours.
                 Over the next 3 years an average of 11.33 plans per year (16 plans
                in 2021, 18 plans in 2022, and 0 in 2023) will be required to send
                notices to participants with suspended benefits. This notice is
                intended to ensure participants understand the calculation and dates of
                their reinstated benefits and, if applicable, make-up payments. PBGC
                estimates that the burden for each plan to prepare required notices is
                $2,000 in contractor cost and 2 hours of in-house fund time. Thus,
                these notices impose estimated annual burdens of $22,667 (11.33 x
                $2,000) and 22.66 (11.33 x 2) hours. PBGC is considering issuing a
                model notice and hereby solicits public comment on whether a model
                notice would be helpful.
                 Also, PBGC estimates that beginning in 2023, PBGC will receive an
                average
                [[Page 36620]]
                of 2.2 requests per year (averaged over 2021-2023 = 0.73 per year) for
                determinations concerning a transfer of assets or liabilities
                (including a spinoff) or merger (1 per year); a withdrawal liability
                settlement greater than $50 million (1 per year); or a contribution
                decrease (.2 (1 every 5 years)) (0 plans in 2021, 0 plans in 2022, and
                2.2 plans in 2023). PBGC needs the information requested to make a
                determination on the proposed transaction, withdrawal liability
                settlement, or contribution decrease. PBGC estimates an average annual
                hour burden (employer and fund office hours) and average annual cost
                burden (contractor costs) per request of:
                 1.6 hours (8 hours x .2) and $5,000 ($25,000 x .2) for a
                proposed contribution change;
                 4 hours and $12,000 for a proposed transfer or merger; and
                 2 hours and $2,000 for a proposed settlement of withdrawal
                liability.
                 PBGC estimates that, beginning in 2023, for 2.2 determination
                requests, the aggregated average annual hour burden will be 7.6 hours
                (1.6+4+2 employer and fund office hours) and the aggregated average
                annual cost burden will be $19,000 ($5,000 + $12,000 + $2,000 in
                contractor costs). For 2021-2023, PBGC estimates an average annual hour
                burden of 2.53 hours (7.6/3) and average annual cost burden of $6,333
                ($19,000/3).
                 The estimated aggregate average annual hour burden for 2021-2023
                for the information collection in part 4262 is 723.20 hours (600 + 98 +
                22.67 + 2.53), which means a cost equivalent of $54,240 assuming a
                blended hourly rate of $75 for employer and fund office administrative,
                clerical, and supervisory time. The estimated aggregate average annual
                cost burden for 2021-2023 for the information collection in part 4262
                is $1,946,600 ($1,800,000 + $117,600 + $22,667 + $6,333), which means
                approximately 4,867 contract hours assuming an average hourly rate of
                $400 for work done by outside actuaries and attorneys. The actual hour
                burden and cost burden per plan will vary depending on plan size and
                other factors.
                 The estimated average annual burden figures for 2021-2023 are shown
                in the following chart.
                ----------------------------------------------------------------------------------------------------------------
                 Hour burden--
                 Average number of respondents p/year Hour burden equivalent cost Cost burden
                 hours
                ----------------------------------------------------------------------------------------------------------------
                Applications for SFA: 60.................................... 600 $45,000 $1,800,000
                Annual compliance statements: 49............................ 98 7,350 117,600
                Notice of reinstatement: 11.33.............................. 22.67 1,700 22,667
                Requests for determination: 1 (0.73)........................ 2.53 190 6,333
                 ---------------------------------------------------
                 Totals: 121............................................. 723.20 54,240 1,946,600
                ----------------------------------------------------------------------------------------------------------------
                 Plan sponsors of multiemployer plans applying for SFA are required
                to file an application with PBGC with the required information under
                part 4262. For payment of SFA, they are required to include with an
                application for SFA, common form SF 3881, ACH Vendor/Miscellaneous
                Payment Enrollment, OMB control no. 1530-0069.
                 Written comments and recommendations for the information
                requirements under this interim final rule should be sent to the Office
                of Information and Regulatory Affairs, Office of Management and Budget,
                Attention: Desk Officer for Pension Benefit Guaranty Corporation
                through www.reginfo.gov/public/do/PRAMain. Find this particular
                information collection by selecting ``Currently under Review--Open for
                Public Comments'' or by using the search function. To be assured of
                consideration, comments must be submitted by August 11, 2021.
                 PBGC is soliciting public comments to--
                 Evaluate whether the collection of information is
                necessary for the proper performance of the functions of the agency,
                including whether the information will have practical utility;
                 Evaluate the accuracy of the agency's estimate of the
                burden of the collection of information, including the validity of the
                methodology and assumptions used;
                 Enhance the quality, utility, and clarity of the
                information to be collected; and
                 Minimize the burden of the collection of information on
                those who are to respond, including the use of appropriate automated,
                electronic, mechanical, or other technological collection techniques or
                other forms of information technology, e.g., permitting electronic
                submission of responses.
                List of Subjects
                29 CFR Part 4000
                 Employee benefit plans, Pension insurance, Pensions, Reporting and
                recordkeeping requirements.
                29 CFR Part 4262
                 Employee benefit plans, Pension insurance, Pensions, Reporting and
                recordkeeping requirements.
                 For the reasons given above, PBGC is amending 29 CFR chapter XL as
                follows:
                PART 4000--FILING, ISSUANCE, COMPUTATION OF TIME, AND RECORD
                RETENTION
                0
                1. The authority citation for part 4000 continues to read as follows:
                 Authority: 29 U.S.C. 1083(k), 1302(b)(3).
                Sec. 4000.3 [Amended]
                0
                2. In Sec. 4000.3, amend paragraph (b)(4) by adding ``4262,'' after
                ``4245,''.
                0
                3. Add part 4262 to read as follows:
                PART 4262--SPECIAL FINANCIAL ASSISTANCE BY PBGC
                Sec.
                4262.1 Purpose.
                4262.2 Definitions.
                4262.3 Eligibility for special financial assistance.
                4262.4 Amount of special financial assistance.
                4262.5 PBGC review of plan assumptions.
                4262.6 Information to be filed.
                4262.7 Plan information.
                4262.8 Actuarial and financial information.
                4262.9 Application for a plan with a partition.
                4262.10 Processing applications.
                4262.11 PBGC action on applications.
                4262.12 Payment of special financial assistance.
                4262.13 Restrictions on special financial assistance.
                4262.14 Permissible investments of special financial assistance.
                4262.15 Reinstatement of benefits previously suspended.
                4262.16 Conditions for special financial assistance.
                4262.17 Other provisions.
                 Authority: 29 U.S.C. 1302(b)(3), 1432.
                Sec. 4262.1 Purpose.
                 The purpose of this part is to prescribe rules governing
                applications for special financial assistance under section 4262 of
                ERISA and related requirements.
                [[Page 36621]]
                Sec. 4262.2 Definitions.
                 The following terms are defined in Sec. 4001.2 of this chapter:
                Code, ERISA, fair market value, IRS, multiemployer plan, PBGC, plan,
                and plan sponsor. In addition, for purposes of this part:
                 Form 5500 means the Annual Return/Report of Employee Benefit Plan
                required to be filed for employee benefit plans under sections 104 and
                4065 of ERISA and sections 6057(b) and 6058(a) of the Code.
                 Merger means merger as defined in Sec. 4231.2 of this chapter.
                 SFA coverage period means the period beginning on the plan's SFA
                measurement date and ending on the last day of the last plan year
                ending in 2051.
                 SFA measurement date means the last day of the calendar quarter
                immediately preceding the date the plan's application was filed.
                 Special financial assistance or SFA means special financial
                assistance from PBGC under section 4262 of ERISA.
                 Transfer and transfer of assets or liabilities means transfer and
                transfer of assets or liabilities as defined in Sec. 4231.2 of this
                chapter.
                Sec. 4262.3 Eligibility for special financial assistance.
                 (a) In general. Subject to all the provisions of this section, a
                multiemployer plan is eligible for special financial assistance in any
                of the following cases:
                 (1) Critical and declining status plans. The plan is in critical
                and declining status within the meaning of section 305(b)(6) of ERISA
                for the specified year; or
                 (2) Plans with a suspension of benefits. A suspension of benefits
                has been approved with respect to the plan under section 305(e)(9) of
                ERISA as of March 11, 2021; or
                 (3) Critical status plans. The plan:
                 (i) Is certified to be in critical status within the meaning of
                section 305(b)(2) of ERISA for a specified year; and
                 (ii) The percentage calculated under paragraph (c)(2) of this
                section was less than 40 percent; and
                 (iii) The ratio of the total number of active participants at the
                end of the plan year required to be entered on the Form 5500 that was
                required to be filed for a specified year to the sum of inactive
                participants (retired or separated participants receiving benefits,
                other retired or separated participants entitled to future benefits,
                and deceased participants whose beneficiaries are receiving or are
                entitled to receive benefits) required to be entered on such Form 5500
                was less than 2 to 3.
                 (4) Insolvent plans. The plan became insolvent for purposes of
                section 418E of the Code after December 16, 2014, has remained
                insolvent, and has not terminated under section 4041A of ERISA as of
                March 11, 2021.
                 (b) Specified year. For purposes of this section, the term
                specified year means a plan year specified by the plan sponsor
                beginning in 2020, 2021, or 2022. The specified years for paragraphs
                (a)(3)(i), (ii), and (iii) of this section need not be the same.
                 (c) Additional rules for critical status plans--(1) Elected status.
                Election of critical status under section 305(b)(4) of ERISA does not
                satisfy the requirement for the certification of critical status by the
                plan's actuary under paragraph (a)(3)(i) of this section.
                 (2) Percentage. The percentage calculated as--
                 (i) The current value of net assets as of the first day of the plan
                year that was required to be entered on the Form 5500 Schedule MB that
                was required to be filed for a specified year; plus
                 (ii) The current value of withdrawal liability due to be received
                by the plan on an accrual basis, reflecting a reasonable allowance for
                amounts considered uncollectible, as of the first day of the plan year
                for the specified year in paragraph (c)(2)(i) of this section (if not
                already included in the current value of net assets in paragraph
                (c)(2)(i) of this section); divided by
                 (iii) The current liability attributable to all benefits as of the
                first day of the plan year required to be entered on the Form 5500
                Schedule MB specified in paragraph (c)(2)(i) of this section.
                 (d) Actuarial assumptions. Determinations of eligibility under
                paragraph (a)(1) or (3) of this section must be made in accordance with
                the provisions in this paragraph (d).
                 (1) Certifications completed before January 1, 2021. For
                certifications of plan status completed before January 1, 2021, PBGC
                will accept assumptions incorporated in the determination of whether a
                plan is in critical status or critical and declining status as
                described in section 305(b) of ERISA unless such assumptions are
                clearly erroneous.
                 (2) Certifications completed after December 31, 2020. For
                certifications of plan status completed after December 31, 2020, the
                determination of whether a plan is in critical status or critical and
                declining status for purposes of eligibility for special financial
                assistance must be made using the assumptions that the plan used in its
                most recently completed certification of plan status before January 1,
                2021, unless such assumptions (excluding the plan's interest rate
                assumption) are unreasonable.
                 (3) Changes in assumptions. If a plan determines that use of the
                assumptions under paragraph (d)(2) of this section is unreasonable, the
                plan's application may include a proposed change in the assumptions
                (excluding the plan's interest rate assumption), as described in Sec.
                4262.5.
                Sec. 4262.4 Amount of special financial assistance.
                 (a) In general. Subject to paragraph (f) of this section, the
                amount of special financial assistance for a plan is the amount (if
                any), subject to adjustment for the date of payment as described in
                Sec. 4262.12, by which--
                 (1) The value, as of the plan's SFA measurement date, of all SFA-
                eligible plan obligations; exceeds
                 (2) The value, as of the plan's SFA measurement date, of all SFA-
                eligible plan resources.
                 (b) SFA-eligible plan obligations. The value of SFA-eligible plan
                obligations as of the plan's SFA measurement date, is the sum of--
                 (1) The present value of benefits expected to be paid by the plan
                during the SFA coverage period including any reinstatement of benefits
                attributable to the elimination of reductions in a participant's or
                beneficiary's benefit due to a suspension of benefits under sections
                305(e)(9) or 4245(a) of ERISA as required under Sec. 4262.15 and any
                restoration of benefits under 26 CFR 1.432(e)(9)-1(e)(3), and assuming
                such reinstatements are paid beginning as of the SFA measurement date;
                and
                 (2) The present value of administrative expenses expected to be
                paid by the plan using plan assets during the SFA coverage period,
                excluding the amount owed to PBGC under section 4261 of ERISA (which is
                added to the amount of special financial assistance in Sec. 4262.12
                determined as of the date special financial assistance is paid).
                 (c) SFA-eligible plan resources. The value of SFA-eligible plan
                resources as of the plan's SFA measurement date, is the sum of--
                 (1) The fair market value of plan assets on the SFA measurement
                date; and
                 (2) The present value of future contributions, withdrawal liability
                payments, and other payments expected to be made to the plan (excluding
                the amount of financial assistance under section 4261 of ERISA and
                special financial assistance to be received by the plan) during the SFA
                coverage period.
                 (d) Deterministic basis. The projections in paragraphs (b)(1) and
                (2) and (c)(2) of this section must be
                [[Page 36622]]
                performed on a deterministic basis using a single set of assumptions as
                described in paragraph (e) of this section. The projections must be
                based on participant census data as of the first day of the plan year
                in which the plan's initial application for special financial
                assistance is filed, or, if the date on which the plan's initial
                application for special financial assistance is filed is less than 270
                days after the beginning of the current plan year and the actuarial
                valuation for the current plan year is not complete, the projections
                may instead be based on the participant census data as of the first day
                of the plan year preceding the year in which the plan's initial
                application for special financial assistance is filed.
                 (e) Actuarial assumptions. The amount of special financial
                assistance must be determined in accordance with generally accepted
                actuarial principles and practices and the provisions in this paragraph
                (e).
                 (1) The assumed interest rate is the lesser of the rate in
                paragraph (e)(1)(i) or (ii) of this section.
                 (i) The interest rate in this paragraph (e)(1)(i) is the interest
                rate used for funding standard account purposes as projected in the
                plan's most recently completed certification of plan status before
                January 1, 2021.
                 (ii) The interest rate in this paragraph (e)(1)(ii) is the interest
                rate that is 200 basis points higher than the rate specified in section
                303(h)(2)(C)(iii) of ERISA (disregarding modifications made under
                clause (iv) of such section) for the month in which the plan's
                application for special financial assistance is filed or one of the 3
                preceding months, as selected by the plan.
                 (2) The assumptions other than the interest rate are those used for
                the plan's most recently completed certification of plan status before
                January 1, 2021, unless such assumptions are unreasonable.
                 (3) If a plan determines that use of the assumptions under
                paragraph (e)(2) of this section is unreasonable, the plan's
                application may include a proposed change in the assumptions (excluding
                the plan's interest rate assumption under paragraph (e)(1) of this
                section), as described in Sec. 4262.5.
                 (f) Certain events--(1) General rules. (i) The special financial
                assistance of a plan that experiences one or more of the events
                described in paragraphs (f)(2), (3), and (4) of this section during the
                period beginning on July 9, 2021, and ending on the SFA measurement
                date is limited to the amount of special financial assistance that
                would have applied to the plan on the SFA measurement date if the
                events had not occurred, as determined in a reasonable manner.
                 (ii) The special financial assistance of a plan that experiences a
                merger event during the period described in paragraph (f)(1)(i) of this
                section is limited to the sum of the amounts of special financial
                assistance that would have applied to the plans involved in the merger
                on the SFA measurement date if the merger had not occurred, as
                determined in a reasonable manner. If any of the plans involved in the
                merger also experiences one or more of the events described in
                paragraph (f)(2), (3), or (4) of this section during the period
                described in paragraph (f)(1)(i) of this section, the amount of special
                financial assistance for that plan on the SFA measurement date,
                determined as if the merger had not occurred, must be determined in
                accordance with paragraph (f)(1)(i) of this section.
                 (2) Transfers. The event described in this paragraph (f)(2) is a
                transfer of assets or liabilities (including a spinoff).
                 (3) Benefit increases. The event described in this paragraph (f)(3)
                is the execution of a plan amendment increasing accrued or projected
                benefits under a plan, other than a restoration of suspended benefits
                that satisfies the requirements of 26 CFR 1.432(e)(9)-1(e)(3).
                 (4) Contribution reductions. The event described in this paragraph
                (f)(4) is the execution of a document reducing a plan's contribution
                rate (including any reduction in benefit accruals adopted
                simultaneously or arising from a pre-existing linkage between benefit
                accruals and contributions), but only if the plan does not demonstrate
                (in accordance with the special financial assistance instructions on
                PBGC's website at www.pbgc.gov) that the risk of loss to participants
                and beneficiaries is reduced (disregarding special financial
                assistance) by execution of the document. The document referred to in
                this paragraph (f)(4) is either--
                 (i) A collective bargaining agreement not rejected by the plan; or
                 (ii) A document reallocating contribution rates.
                 (5) Effect of pre-event ineligibility. In determining the amount of
                special financial assistance that would have applied to a plan if an
                event described in this paragraph (f) had not occurred, if the plan
                would have been ineligible for special financial assistance under Sec.
                4262.3 in the absence of the event, then the amount of special
                financial assistance is deemed to be $0 (zero).
                 (6) Examples. The following examples illustrate the provisions of
                paragraph (f) of this section.
                 (i) Example 1. Plan A applies for special financial assistance. If
                the limitation in paragraph (f)(1)(i) of this section did not apply,
                Plan A would be entitled to special financial assistance in the amount
                of $20X. Before the SFA measurement date, but on or after July 9, 2021,
                Plan A transferred a portion of its assets and liabilities to Plan B.
                If the transfer had not occurred, Plan A would, as of the SFA
                measurement date, be entitled to special financial assistance in the
                amount of $40X. Although an event described in paragraph (f)(2) of this
                section occurred with respect to Plan A, Plan A's special financial
                assistance is unaffected by the limitation in paragraph (f)(1)(i) of
                this section and is $20X. Plan B also applies for special financial
                assistance. If the limitation in paragraph (f)(1)(i) of this section
                did not apply, Plan B would be entitled to special financial assistance
                in the amount of $30X. If the transfer from Plan A had not occurred,
                Plan B would, as of the SFA measurement date, be ineligible for special
                financial assistance. As a result of the event described in paragraph
                (f)(2) of this section, the limitation in paragraph (f)(1)(i) of this
                section reduces Plan B's special financial assistance from $30X to $0.
                 (ii) Example 2. Plan C applies for special financial assistance. If
                the limitation in paragraph (f)(1)(ii) of this section did not apply,
                Plan C would be entitled to special financial assistance in the amount
                of $40X. Before the SFA measurement date, but on or after July 9, 2021,
                Plans A and B were merged into existing Plan C. If the mergers had not
                occurred, Plan A would not be eligible for special financial
                assistance, and Plan B and Plan C would be entitled, respectively, to
                $10X and $5X of special financial assistance as of the SFA measurement
                date. As a result of the merger event described in paragraph (f)(1)(ii)
                of this section, the limitation in paragraph (f)(1)(ii) of this section
                reduces Plan C's special financial assistance from $40X to $15X.
                 (iii) Example 3. Plan A applies for special financial assistance.
                If the limitation in paragraph (f)(1)(i) of this section did not apply,
                Plan A would be entitled to special financial assistance in the amount
                of $10X. Before the SFA measurement date, but on or after July 9, 2021,
                projected benefits under Plan A were increased. If the increase had not
                occurred, Plan A would, as of the SFA measurement date, be ineligible
                for special financial assistance. As a result of the event described in
                paragraph (f)(3) of this section, applying the limitation in paragraph
                (f)(1)(i) of this section and in accordance with
                [[Page 36623]]
                paragraph (f)(5) of this section, Plan A is treated as being entitled
                to special financial assistance of $0.
                 (iv) Example 4. Plan A applies for special financial assistance. If
                the limitation in paragraph (f)(1)(i) of this section did not apply,
                Plan A would be entitled to special financial assistance in the amount
                of $10X. Before the SFA measurement date, but on or after July 9, 2021,
                Plan A's contribution rate was reduced. Plan A's benefit formula states
                that the monthly benefit accrual for a participant for a plan year is
                2.0% of the contributions paid on behalf of the participant for that
                plan year. Since there is a pre-existing linkage between benefit
                accruals and contributions, the event described in paragraph (f)(4) of
                this section includes both the reduction in benefit accruals and the
                reduction in the contribution rate. If the contribution rate reduction
                and the reduction in benefit accruals had not occurred, Plan A would,
                as of the SFA measurement date, be entitled to special financial
                assistance of $8X. Plan A does not provide a demonstration that the
                risk of loss to participants and beneficiaries is reduced (disregarding
                special financial assistance) due to the reduction in contribution rate
                and the reduction in benefit accruals. As a result of the events
                described in paragraph (f)(4) of this section, the limitation in
                paragraph (f)(1)(i) of this section reduces Plan A's special financial
                assistance from $10X to $8X.
                Sec. 4262.5 PBGC review of plan assumptions.
                 (a) In general. (1) As set forth in Sec. 4262.3(d)(1), PBGC will
                accept the assumptions used by a plan to determine eligibility for
                special financial assistance under Sec. 4262.3(d)(1) unless PBGC
                determines that such assumptions are clearly erroneous.
                 (2) PBGC will accept the assumptions used by a plan to determine
                eligibility for special financial assistance under Sec. 4262.3(d)(2)
                or to determine the amount of special financial assistance under Sec.
                4262.4(e)(2) unless PBGC determines that an assumption is unreasonable.
                 (3) PBGC will accept a plan's changes in assumptions under
                paragraph (c) of this section except to the extent that PBGC determines
                that an assumption is individually unreasonable, or the proposed
                changed assumptions are unreasonable in the aggregate.
                 (b) Reasonableness of assumptions. (1) Each of the actuarial
                assumptions and methods used for the actuarial projections (excluding
                the interest rate assumption) must be reasonable in accordance with
                generally accepted actuarial principles and practices, taking into
                account the experience of the plan and reasonable expectations. The
                actuary's selection of assumptions about future covered employment and
                contribution levels (including contribution base units and contribution
                rates) may be based on information provided by the plan sponsor, which
                must act in good faith in providing the information.
                 (2) If a plan has a change in assumptions under paragraph (c) of
                this section, each of the actuarial assumptions and methods (other than
                the interest rate) must be reasonable and the combination of those
                actuarial assumptions and methods (excluding the interest rate) must
                also be reasonable.
                 (c) Changes in assumptions. If a plan determines that use of an
                assumption described in Sec. 4262.3(d)(2) or Sec. 4262.4(e)(2) is
                unreasonable, the plan's application may include a proposed change in
                the assumptions (excluding the plan's interest rate assumption).
                 (1) The application for special financial assistance must--
                 (i) Describe why the original assumption is no longer reasonable;
                 (ii) Propose to use a different assumption (the changed
                assumption); and
                 (iii) Demonstrate that the changed assumption is reasonable.
                 (2) PBGC will provide guidelines for changed assumptions on PBGC's
                website at www.pbgc.gov.
                Sec. 4262.6 Information to be filed.
                 (a) In general. An application for special financial assistance
                must include the information specified in this section and Sec. Sec.
                4262.7 (plan information) and 4262.8 (actuarial and financial
                information); a copy of the executed plan amendment required under
                paragraph (e)(1) of this section; a copy of the proposed plan amendment
                required under paragraph (e)(2) of this section; a completed checklist;
                and other information as described in the special financial assistance
                instructions on PBGC's website at www.pbgc.gov. If any of the
                information required for an application for special financial
                assistance under this part is not accurately completed or not filed
                with the application, the application will not be considered complete.
                 (b) Required trustee signature. An application for special
                financial assistance must--
                 (1) Be signed and dated by an authorized trustee, who is a current
                member of the board of trustees and who is authorized to sign on behalf
                of the board of trustees, or by another authorized representative of
                the plan sponsor; and
                 (2) Include the following statements signed by an authorized
                trustee who is a current member of the board of trustees: ``Under
                penalties of perjury under the laws of the United States of America, I
                declare that I have examined this application, including accompanying
                documents, and, to the best of my knowledge and belief, the application
                contains all the relevant facts relating to the application, and such
                facts are true, correct, and complete.''
                 (c) Actuarial calculations. All calculations that are required in
                an application for special financial assistance under this part must
                include a certification by the plan's enrolled actuary.
                 (d) Clarifying information. PBGC may require a plan sponsor to file
                additional information to clarify or verify information provided in the
                plan's application. The plan sponsor must promptly file any such
                information with PBGC upon request.
                 (e) Duty to amend and supplement application. The plan sponsor of a
                plan applying for special financial assistance must--
                 (1) Amend the plan to include the following special financial
                assistance provision effective through the end of the last plan year
                ending in 2051: ``Beginning with the SFA measurement date selected by
                the plan in the plan's application for special financial assistance,
                the plan shall be administered in accordance with the restrictions and
                conditions specified in section 4262 of ERISA and 29 CFR part 4262.
                This amendment is contingent upon approval by PBGC of the plan's
                application for special financial assistance.''
                 (2) Amend the plan to reinstate benefits, as described in Sec.
                4262.15(a)(1), and make payments of previously suspended benefits,
                described in Sec. 4262.15(a)(2), in accordance with guidance issued by
                the Secretary of the Treasury under section 432(k)(2) of the Code.
                 (3) During any time in which an application is pending approval by
                PBGC, the plan sponsor must promptly notify PBGC in writing as soon as
                the plan sponsor becomes aware that any material fact or representation
                contained in or relating to the application, or in any supporting
                documents, is no longer accurate, or that any material fact or
                representation was omitted from the application or supporting
                documents.
                 (f) Disclosure of information. Unless confidential under the
                Privacy Act, all information that is filed with PBGC for
                [[Page 36624]]
                an application for special financial assistance under this part may be
                made publicly available, at PBGC's sole discretion, on PBGC's website
                at www.pbgc.gov or otherwise publicly disclosed. Except to the extent
                required by the Privacy Act, PBGC provides no assurance of
                confidentiality in any information or documentation included in an
                application for special financial assistance.
                Sec. 4262.7 Plan information.
                 (a) Basic information. An application for special financial
                assistance must include all of the following information with respect
                to the plan and amount of special financial assistance requested:
                 (1) Name of the plan, Employer Identification Number (EIN), and
                three-digit Plan Number (PN).
                 (2) Name of the individual filing the application and role of the
                individual with respect to the plan.
                 (3) Name, address, email, and telephone number of the plan sponsor
                and the plan sponsor's authorized representatives, if any.
                 (4) The total amount of special financial assistance requested.
                 (b) Eligibility. An application must identify the eligibility
                requirements in Sec. 4262.3 that the plan satisfies to be eligible for
                special financial assistance. An application for a plan that is
                eligible under section 4262(b)(1)(C) of ERISA must include a
                demonstration to support that the plan meets the eligibility
                requirements.
                 (c) Priority group identification. An application must identify any
                priority group under Sec. 4262.10(d)(2) that the plan is in. An
                application must include a demonstration to support the plan's
                inclusion in a priority group, unless the plan is insolvent under
                section 4245(a) of ERISA, has implemented a suspension of benefits
                under section 305(e)(9) of ERISA as of March 11, 2021, is in critical
                and declining status (as defined in section 305(b)(6) of ERISA) and had
                350,000 or more participants, or is listed on PBGC's website at
                www.pbgc.gov as a plan in priority group 6, as defined under Sec.
                4262.10(d)(2)(vi).
                 (d) Plans with a suspension of benefits. If a plan previously
                suspended benefits under sections 305(e)(9) or 4245(a) of ERISA, its
                application must include a description of how the plan will reinstate
                the benefits that were previously suspended and a proposed schedule
                showing aggregate amount and timing of payments (in accordance with
                Sec. 4262.15) to participants and beneficiaries under the plan. The
                proposed schedule should be prepared assuming the effective date for
                reinstatement is the SFA measurement date and that payments for
                previously suspended benefits described in Sec. 4262.15(a)(2) are paid
                or commence on the SFA measurement date. If the plan restored benefits
                under 26 CFR 1.432(e)(9)-1(e)(3) before the SFA measurement date, the
                proposed schedule should reflect the amount and timing of payments of
                restored benefits and the effect of the restoration on the benefits
                remaining to be reinstated.
                 (e) Plan documentation. An application must include all of the
                following plan documentation:
                 (1) Most recent plan document or restatement of the plan document
                and all subsequent amendments adopted (if any), including a copy of the
                executed plan amendment required under Sec. 4262.6(e)(1).
                 (2) A copy of the proposed plan amendment required under Sec.
                4262.6(e)(2) and certification by the plan sponsor that the plan
                amendment will be timely adopted.
                 (3) Most recent trust agreement or restatement of the trust
                agreement and all subsequent adopted amendments (if any).
                 (4) Most recent IRS determination letter.
                 (5) Actuarial valuation report completed for the 2018 plan year and
                each subsequent actuarial valuation report completed before the date
                the plan's application was filed.
                 (6) Most recent rehabilitation plan (or funding improvement plan,
                if applicable), including all subsequent amendments and updates, and
                the percentage of total contributions received under each schedule of
                the rehabilitation plan for the most recent plan year available. If the
                most recent rehabilitation plan does not include historical
                documentation of rehabilitation plan changes (if any) that occurred in
                calendar year 2020 and later, these details must be provided in a
                supplemental document.
                 (7) Most recent Form 5500 and all schedules and attachments
                (including the audited financial statement).
                 (8) Plan actuary's certification of plan status required under
                section 305(b)(3) of ERISA completed for the 2018 plan year and each
                subsequent annual certification completed before the date the plan's
                application was filed, with documentation supporting each
                certification, which must include the projections and information
                required in the special financial assistance instructions on PBGC's
                website at www.pbgc.gov.
                 (9) Most recent statement for each of the plan's cash and
                investment accounts.
                 (10) Most recent plan financial statement (audited, or unaudited if
                audited is not available).
                 (11) Bank account and other information necessary for electronic
                payment of funds.
                 (12) All written policies and procedures governing withdrawal
                liability determination, assessment, collection, settlement, and
                payment.
                Sec. 4262.8 Actuarial and financial information.
                 (a) Required information. An application for special financial
                assistance must include all of the following actuarial and financial
                information:
                 (1) For each plan year from the 2018 plan year until the most
                recent plan year for which the Form 5500 is required to be filed, the
                projection of expected benefit payments as required to be attached to
                the Form 5500 Schedule MB if the response to the question at line 8b(1)
                of the Form 5500 Schedule MB is ``Yes''.
                 (2) For a plan that has 10,000 or more participants as required to
                be entered on line 6f of the plan's most recently filed Form 5500, a
                listing of the 15 largest contributing employers and the contribution
                amounts for each for the most recently completed plan year.
                 (3) Historical plan financial information for each of the most
                recent 10 plan years immediately preceding the date the plan's
                application was filed that separately identifies: Total contributions;
                total contribution base units; average contribution rates; number of
                active participants at the beginning of each plan year; and other
                sources of non-investment income, including, if applicable, withdrawal
                liability payments collected, contributions from reciprocity
                agreements, and other sources of contributions or income not already
                identified.
                 (4) Information used to determine the amount of the requested
                special financial assistance, based on a deterministic projection,
                including all of the following information--
                 (i) Interest rate required under Sec. 4262.4(e)(1), including
                supporting details on how it was determined.
                 (ii) Fair market value of plan assets determined as of the SFA
                measurement date; a certification from the plan sponsor with respect to
                the accuracy of this amount, including information that substantiates
                the asset value and any projections to the SFA measurement date
                (including details and supporting rationale); and a reconciliation of
                the fair market value of plan assets from the date of the most recent
                plan financial
                [[Page 36625]]
                statement to the SFA measurement date showing contributions, withdrawal
                liability payments, benefit payments, administrative expenses, and
                investment income.
                 (iii) Special financial assistance determined as a lump sum as of
                the SFA measurement date.
                 (iv) For each plan year in the SFA coverage period: The projected
                amount of contributions, projected withdrawal liability payments, and
                other payments expected to be made to the plan.
                 (v) For each plan year in the SFA coverage period: Benefit payments
                described in Sec. 4262.4(b)(1) attributable to the reinstatement of
                benefits under Sec. 4262.15 that were previously suspended through the
                SFA measurement date and any benefits restored under 26 CFR
                1.432(e)(9)-1(e)(3).
                 (vi) For each plan year in the SFA coverage period: Benefit
                payments described in Sec. 4262.4(b)(1) (excluding the payments in
                paragraph (a)(4)(v) of this section), separately for current retirees
                and beneficiaries in pay status, terminated participants not yet in pay
                status, current active participants, and new entrants.
                 (vii) For each plan year in the SFA coverage period: Administrative
                expenses expected to be paid using plan assets, excluding the amount
                owed PBGC under section 4261 of ERISA.
                 (viii) For each plan year in the SFA coverage period: The projected
                investment income based on the interest rate required under Sec.
                4262.4(e)(1) and the projected fair market value of plan assets at the
                end of each plan year.
                 (ix) The present value as of the SFA measurement date of each of
                the items provided under paragraph (a)(4)(iv) through (viii) of this
                section.
                 (5) Projected contributions and withdrawal liability payments used
                to calculate the requested special financial assistance amount in Sec.
                4262.4, including total contributions, contribution base units, average
                contribution rate(s), reciprocal contributions (if applicable),
                additional contributions from the rehabilitation plan, and any other
                contributions, and number of active participants at the beginning of
                each plan year. For withdrawal liability, separate projections for
                withdrawn employers and for future assumed withdrawals.
                 (6) A description of the development of the assumed future
                contributions and future withdrawal liability payments in paragraph
                (a)(5) of this section.
                 (7) For a plan that has 350,000 or more participants reported on
                line 6f of its most recently filed Form 5500, the participant census
                data utilized by the plan actuary in developing the cash flow
                projections included in the application.
                 (b) Information required for changed assumptions. An application
                for a plan that proposes to change any assumption used in the plan's
                most recently completed certification of plan status before January 1,
                2021, must include all of the following information:
                 (1) A table identifying which assumptions used in demonstrating the
                plan's eligibility for special financial assistance or in calculating
                the amount of special financial assistance differ from those
                assumptions used in the plan's most recently completed certification of
                plan status before January 1, 2021, and detailed narrative explanations
                (with supporting rationale and information) as to why any assumption
                used in the certification is no longer reasonable and why the changed
                assumption is reasonable.
                 (2) Deterministic cash flow projection (``Baseline'') in accordance
                with the special financial assistance instructions on PBGC's website at
                www.pbgc.gov that shows the amount of special financial assistance that
                would be determined if all underlying assumptions used in the
                projection were the same as those used in the actuarial certification
                of plan status last completed before January 1, 2021 (excluding the
                plan's interest rate, which must be the same as the interest rate
                required under Sec. 4262.4(e)(1)). For purposes of this paragraph
                (b)(2), certain changes in assumptions as described in the special
                financial assistance instructions on PBGC's website at www.pbgc.gov
                should be reflected in the Baseline projection.
                 (3) In accordance with the special financial assistance
                instructions on PBGC's website at www.pbgc.gov, a reconciliation of the
                change in the requested special financial assistance due to each
                changed assumption from the Baseline to the requested special financial
                assistance amount in paragraph (a)(4)(iii) of this section, showing,
                for each assumption change from the Baseline, a deterministic
                projection calculated in the same manner as the requested amount in
                Sec. 4262.4.
                 (c) Information required for certain events. An application for a
                plan with respect to which an event described in Sec. 4262.4(f) occurs
                on or after July 9, 2021, must include the applicable information
                related to the event specified in special financial assistance
                instructions on PBGC's website at www.pbgc.gov.
                Sec. 4262.9 Application for a plan with a partition.
                 (a) In general. This section applies to plans partitioned under
                section 4233 of ERISA. A partitioned plan is in priority group 2 for
                purposes of Sec. 4262.10(d).
                 (b) Filing requirements. A plan sponsor of a partitioned plan
                filing an application for special financial assistance must--
                 (1) File one application for the original plan and successor plan.
                 (2) Include in the application--
                 (i) A statement that the plan was partitioned under section 4233 of
                ERISA;
                 (ii) A copy of the plan document and other amendments required
                under paragraph (c)(2) of this section; and
                 (iii) The information required in Sec. Sec. 4262.6 through 4262.8.
                 (3) If a plan sponsor has already filed with PBGC any of the
                required information described in paragraph (b)(2)(iii) of this
                section, the plan sponsor is not required to file that information with
                its application for special financial assistance. For any such
                information not filed with the application, the plan sponsor must note
                on the checklist described under Sec. 4262.6(a) when the information
                was filed.
                 (c) Rescission of partition order. Effective when special financial
                assistance is paid under Sec. 4262.12, and in a manner consistent with
                the application procedure determined under paragraph (b) of this
                section--
                 (1) PBGC will rescind the partition order; and
                 (2) The plan sponsor must amend the plan to remove any provisions
                or amendments that were required to be adopted under the partition
                order.
                Sec. 4262.10 Processing applications.
                 (a) In general. Any application for special financial assistance
                for an eligible multiemployer plan must be filed by the plan sponsor in
                accordance with the provisions of this part and the special financial
                assistance instructions on PBGC's website at www.pbgc.gov.
                 (b) Method of filing. An application filed with PBGC under this
                part must be made electronically in accordance with the rules in
                subpart A of part 4000 of this chapter. The time period for filing an
                application under this part must be computed under the rules in subpart
                D of part 4000 of this chapter.
                 (c) Where to file. (1) An application filed with PBGC under this
                part must be filed as described in Sec. 4000.4 of this chapter.
                 (2) Section 432(k)(1)(D) of the Code requires an application in a
                priority category under paragraph (d)(2) of this
                [[Page 36626]]
                section to be submitted to the Secretary of the Treasury. If the
                requirement in the preceding sentence applies to an application, PBGC
                will transmit the application to the Department of the Treasury on
                behalf of the plan.
                 (d) When to file. Any initial application for special financial
                assistance must be filed by December 31, 2025, and any revised
                application must be filed by December 31, 2026. Any application other
                than a plan's initial application is a revised application regardless
                of whether it differs from the initial application.
                 (1) Processing system. To accommodate expeditious processing of
                many special financial assistance applications in a limited time
                period:
                 (i) The number of applications accepted for filing will be limited
                in such manner that, in PBGC's estimation, each application can be
                processed within 120 days.
                 (ii) Plans specified in paragraph (d)(2) of this section will be
                given priority to file an application before plans not specified in
                paragraph (d)(2) of this section.
                 (iii) Notices on PBGC's website at www.pbgc.gov will apprise
                potential filers of the current priority group(s) for which
                applications are being accepted and whether PBGC is accepting
                applications for filing as well as other information about priority
                groups and filing.
                 (2) Priority groups. Until not later than March 11, 2023, the plan
                sponsor of an eligible multiemployer plan will be given priority to
                file an application if the plan is in one of the priority groups in
                paragraphs (d)(2)(i) through (vii) of this section, listed in order of
                higher priority group to lower priority group. When applications for
                plans in a priority group are accepted for filing, PBGC will continue
                to accept applications for plans in a higher priority group, subject to
                paragraph (d)(1) of this section.
                 (i) Priority group 1. A plan is in priority group 1 if the plan is
                insolvent or is projected to become insolvent under section 4245 of
                ERISA by March 11, 2022. A plan in priority group 1 may file an
                application beginning on July 9, 2021.
                 (ii) Priority group 2. A plan is in priority group 2 if the plan
                has implemented a suspension of benefits under section 305(e)(9) of
                ERISA as of March 11, 2021; or the plan is expected to be insolvent
                under section 4245 of ERISA within 1 year of the date the plan's
                application was filed. A plan in priority group 2 may file an
                application beginning on January 1, 2022, or such earlier date
                specified on PBGC's website at www.pbgc.gov.
                 (iii) Priority group 3. A plan is in priority group 3 if the plan
                was in critical and declining status (as defined in section 305(b)(6)
                of ERISA) and had 350,000 or more participants. A plan in priority
                group 3 may file an application beginning on April 1, 2022, or such
                earlier date specified on PBGC's website at www.pbgc.gov.
                 (iv) Priority group 4. A plan is in priority group 4 if the plan is
                projected to become insolvent under section 4245 of ERISA by March 11,
                2023. A plan in priority group 4 may file an application beginning on
                July 1, 2022, or such earlier date specified on PBGC's website at
                www.pbgc.gov.
                 (v) Priority group 5. A plan is in priority group 5 if the plan is
                projected to become insolvent under section 4245 of ERISA by March 11,
                2026. The date a plan in priority group 5 may file an application will
                be specified on PBGC's website at www.pbgc.gov at least 21 days in
                advance of such date, and such date will be no later than February 11,
                2023.
                 (vi) Priority group 6. A plan is in priority group 6 if the plan is
                projected by PBGC to have a present value of financial assistance
                payments under section 4261 of ERISA that exceeds $1,000,000,000 if
                special financial assistance is not ordered. PBGC will list the plans
                in priority group 6 on its website at www.pbgc.gov. The date a plan in
                priority group 6 may file an application will be specified on PBGC's
                website at www.pbgc.gov at least 21 days in advance of such date, and
                such date will be no later than February 11, 2023.
                 (vii) Additional priority groups. PBGC may add additional priority
                groups based on other circumstances similar to those described for the
                groups listed in paragraphs (d)(2)(i) through (vi) of this section. If
                added, additional priority groups and the date PBGC will begin
                accepting applications for such additional priority groups will be
                posted in guidance on PBGC's website at www.pbgc.gov.
                 (e) Filing date. An application will be considered filed on the
                date it is submitted to PBGC if it meets the applicable requirements in
                paragraph (d) of this section and can be accommodated in accordance
                with the processing system described in paragraph (d)(1) of this
                section or the emergency filing process described in paragraph (f) of
                this section. Otherwise, the application will not be considered filed
                and PBGC will notify the applicant that the application was not
                properly filed and that the application must be filed in accordance
                with the processing system and instructions on PBGC's website at
                www.pbgc.gov.
                 (f) Emergency filing. Beginning when PBGC accepts applications in
                priority group 2 described in paragraph (d)(2)(ii) of this section, and
                notwithstanding the processing system described in paragraph (d)(1) of
                this section, an application may be accepted for filing if--
                 (1) It is an application for a plan that either--
                 (i) Is insolvent or expected to be insolvent under section 4245 of
                ERISA within 1 year of the date the plan's application was filed; or
                 (ii) Has suspended benefits under section 305(e)(9) of ERISA as of
                March 11, 2021; and
                 (2) The filer notifies PBGC before submitting the application that
                the application qualifies as an emergency filing under this paragraph
                (f) in accordance with instructions on PBGC's website at www.pbgc.gov.
                 (g) Informal consultation. Nothing in this section prohibits a plan
                sponsor from contacting PBGC informally to discuss a potential
                application for special financial assistance.
                Sec. 4262.11 PBGC action on applications.
                 (a) In general. Within 120 days after the date an initial or
                revised application for special financial assistance is properly and
                timely filed, PBGC will--
                 (1) Approve the application and notify the plan sponsor of the
                payment of special financial assistance in accordance with Sec.
                4262.12; or
                 (2) Deny the application because--
                 (i) The application is incomplete, and notify the plan sponsor of
                the missing information; or
                 (ii) An assumption is unreasonable, a proposed change in assumption
                is individually unreasonable, or the proposed changed assumptions are
                unreasonable in the aggregate, and notify the plan sponsor of the
                reasons for the determination; or
                 (iii) The plan is not an eligible multiemployer plan, and notify
                the plan sponsor of the reasons the plan fails to be eligible for
                special financial assistance; or
                 (3) Fail to act on the application, in which case the application
                is deemed approved, and notify the plan sponsor of the payment of
                special financial assistance in accordance with Sec. 4262.12.
                 (b) Incomplete application. PBGC will consider an application
                incomplete under paragraph (a)(2)(i) of this section unless the
                application accurately includes the information required to be filed
                under this part and the special financial assistance instructions on
                [[Page 36627]]
                PBGC's website at www.pbgc.gov, including all additional information
                that PBGC requires under Sec. 4262.6(d).
                 (c) Application base data. (1) A plan's base data are--
                 (i) The plan's SFA measurement date as required to be reported in
                the plan's initial application for special financial assistance;
                 (ii) The plan's participant census data used in the plan's initial
                application for special financial assistance; and
                 (iii) The plan's interest rate required under Sec. 4262.4(e)(1).
                 (2) A plan's base data are fixed by the filing of the plan's
                initial application and must be reported on any revised application for
                the plan.
                 (d) Withdrawn applications. (1) A plan's application for special
                financial assistance may be withdrawn at any time before or after PBGC
                denies the application but not after PBGC has approved the application.
                 (2) Any withdrawal of a plan's application must be by written
                notice to PBGC submitted by any person authorized to submit an
                application for the plan and in accordance with the special financial
                assistance instructions on PBGC's website at www.pbgc.gov.
                 (3) An application submitted for a plan after the withdrawal of an
                application is a revised application and must comply with the
                requirements in this part for an initial application except that it
                must use the base data required in paragraph (c) of this section for
                the initial application.
                 (e) Denied applications. If PBGC denies a plan's application, and
                the denied application is not withdrawn, any revised application must
                not differ from the denied application except to the extent necessary
                to address the reasons cited by PBGC for the denial.
                 (f) Revised applications. A plan's revised application is processed
                in the same way as an initial application.
                 (g) Final agency action. PBGC's decision on an application for
                special financial assistance under this section is a final agency
                action under Sec. 4003.22(b) of this chapter for purposes of judicial
                review under the Administrative Procedure Act (5 U.S.C. 701 et seq.).
                Sec. 4262.12 Payment of special financial assistance.
                 (a) Amount of special financial assistance. (1) The amount of
                special financial assistance to be paid to or for a plan by PBGC will
                be the total of--
                 (i) The amount required as demonstrated by the plan sponsor on the
                application for such special financial assistance, determined under
                Sec. 4262.4 as of the SFA measurement date; plus
                 (ii) Interest on the amount in paragraph (a)(1)(i) of this section
                from the SFA measurement date to the date PBGC sends payment (not the
                bank settlement date) at a rate equal to the interest rate required
                under Sec. 4262.4(e)(1); plus
                 (iii) The amount owed to PBGC under section 4261 of ERISA
                determined as of the date PBGC sends payment of special financial
                assistance; minus
                 (iv) Financial assistance payments under section 4261 of ERISA
                received by the plan between the SFA measurement date and the date PBGC
                sends payment of special financial assistance, with interest on each
                such financial assistance payment from the date thereof to the date
                PBGC sends payment as described in paragraph (a)(1)(ii) of this section
                calculated at a rate equal to the interest rate required under Sec.
                4262.4(e)(1).
                 (2) The plan must include in its application payment instructions
                in accordance with the special financial instructions on PBGC's website
                at www.pbgc.gov. Payment will be considered made by PBGC when, in
                accordance with the payment instructions in the application, PBGC no
                longer has ownership of the amount being paid. Any adjustment for delay
                will be borne by PBGC only to the extent that it arises while PBGC has
                ownership of the funds.
                 (b) Repayment of traditional financial assistance. If a plan has an
                obligation to repay financial assistance under section 4261 of ERISA,
                PBGC will--
                 (1) Issue a written demand for repayment of financial assistance
                when the application is approved; and
                 (2) Deduct the amount of financial assistance, including interest,
                that the plan owes PBGC from the special financial assistance before
                payment to the plan.
                 (c) Date of payment of special financial assistance. Special
                financial assistance issued by PBGC will be paid as soon as practicable
                upon approval of the plan's special financial assistance application
                but not later than the earlier of--
                 (1) Ninety days after a plan's special financial assistance
                application is approved by PBGC or deemed approved; or
                 (2) September 30, 2030.
                 (d) Manner of payment. The payment of special financial assistance
                to a plan will be made by PBGC in a lump sum or substantially so and is
                not a loan subject to repayment obligations. Notwithstanding the
                foregoing, the following payment obligations apply:
                 (1) Special financial assistance is subject to recalculation or
                adjustment to correct a clerical or arithmetic error. PBGC will, and
                plans must, make payments as needed to reflect any such recalculation
                or adjustment in a timely manner.
                 (2) If PBGC determines that a payment for special financial
                assistance to a plan exceeded the amount to which the plan was
                entitled, any excess payment constitutes a debt to the Federal
                Government. If not paid within 90 calendar days after demand, PBGC may
                reduce the debt by any action permitted by Federal statute. Except
                where otherwise provided by statutes or regulations, PBGC will charge
                interest and other amounts permitted on an overdue debt in accordance
                with the Federal Claims Collection Standards (31 CFR parts 900 through
                999). The date from which interest is computed is not extended by
                litigation or the filing of any form of appeal.
                Sec. 4262.13 Restrictions on special financial assistance.
                 (a) In general. A plan that receives special financial assistance
                must be administered in accordance with the restrictions in this
                section and in Sec. 4262.14.
                 (b) Restrictions. Special financial assistance received, and any
                earnings thereon--
                 (1) May be used by the plan only to make benefit payments and pay
                administrative expenses;
                 (2) Must be segregated from other plan assets;
                 (3) May be used before other plan assets are used to make benefit
                payments and pay administrative expenses; and
                 (4) Must be invested in investment-grade bonds or other investments
                as permitted by PBGC in Sec. 4262.14.
                Sec. 4262.14 Permissible investments of special financial assistance.
                 (a) In general. A plan that receives special financial assistance
                may invest amounts attributable to such assistance monies only in fixed
                income securities denominated in U.S. dollars and in accordance with
                this section. For purposes of this section, such securities are
                referred to as permissible investments.
                 (b) Other definitions. For purposes of this section--
                 (1) Adequate capacity to meet financial commitments means that the
                risk of default by the obligor is low and the full and timely repayment
                of principal and interest on the security is expected.
                 (2) Permissible fund vehicles mean exchange traded funds, mutual
                funds, pooled trusts, or other commingled
                [[Page 36628]]
                securities whose investible assets are invested solely in fixed income
                securities denominated in U.S. dollars, with an average credit quality,
                weighted by market value, that meets the definition of investment
                grade.
                 (3) Investment grade means publicly traded securities for which the
                issuer has at least adequate capacity to meet the financial commitments
                under the security for the projected life of the asset or exposure.
                 (4) Leverage means the right to a return on a capital base that
                exceeds the investment which was contributed to the entity or
                instrument achieving a return.
                 (c) Holdings. A plan must hold permissible investments in either--
                 (1) Individual bonds, securities, or other debt securities; or
                 (2) Permissible fund vehicles.
                 (d) Quality of permissible investments. Permissible investments
                must be considered investment grade by a fiduciary, within the meaning
                of section 3(21) of ERISA, who is or seeks the advice of an experienced
                investor (such as an Investment Advisor registered under section 203 of
                the Investment Advisor's Act of 1940), except that up to 5 percent of
                the aggregate market value of a plan's assets attributable to special
                financial assistance may be invested in securities or permissible fund
                vehicles that were investment grade at the time of purchase but are no
                longer investment grade.
                 (e) Leverage and derivative limitations on permissible fund
                vehicles or portfolio of individual securities held by the plan. (1)
                Permissible investments, whether held through permissible fund vehicles
                or directly through a portfolio of individual securities may not be
                supplemented by derivatives or otherwise leveraged in a way that could
                increase the interest rate risk or credit risk in the fund vehicle or
                portfolio beyond the risk in a portfolio of physical securities,
                meeting the definition of permissible investments in paragraph (a) of
                this section, equal to the market value of the portfolio; and
                 (2) Any notional derivative exposure, other than exposure gained
                through a permissible fund vehicle, must be supported by liquid assets
                that are cash or cash equivalents denominated in U.S. dollars.
                Sec. 4262.15 Reinstatement of benefits previously suspended.
                 (a) In accordance with guidance issued by the Secretary of the
                Treasury under section 432(k) of the Code, a plan with benefits that
                were suspended under sections 305(e)(9) or 4245(a) of ERISA must:
                 (1) Reinstate any benefits that were suspended for participants and
                beneficiaries effective as of the first month in which the special
                financial assistance is paid to the plan; and
                 (2) Make payments equal to the amounts of benefits previously
                suspended to any participants or beneficiaries who are in pay status as
                of the date that the special financial assistance is paid.
                 (b) A plan must make the payments in paragraph (a)(2) of this
                section either in:
                 (1) A single lump sum no later than 3 months after the date that
                the special financial assistance is paid to the plan; or
                 (2) Equal monthly installments over a period of 5 years, with the
                first installment paid no later than 3 months after the date that the
                special financial assistance is paid to the plan, with no installment
                payment adjusted for interest.
                 (c) The plan sponsor of a plan with benefits that were suspended
                under sections 305(e)(9) or 4245(a) of ERISA must issue a notice of
                reinstatement to participants and beneficiaries whose benefits were
                previously suspended and then reinstated in accordance with section
                4262(k) of ERISA. The requirements for the notice are in notice of
                reinstatement instructions available on PBGC's website at www.pbgc.gov.
                Sec. 4262.16 Conditions for special financial assistance.
                 (a) In general. A plan that receives special financial assistance
                must be administered in accordance with the conditions in this section.
                 (b) Benefit increases. This paragraph (b) applies to benefits and
                benefit increases described in section 4022A(b)(1) of ERISA without
                regard to the time the benefit or benefit increase has been in effect.
                This paragraph (b) does not apply to the reinstatement of benefits that
                were suspended under sections 305(e)(9) or 4245(a) of ERISA (as
                provided under Sec. 4262.15) or a restoration of benefits under 26 CFR
                1.432(e)(9)-1(e)(3).
                 (1) Retrospective. A benefit or benefit increase must not be
                adopted during the SFA coverage period if it is in whole or in part
                attributable to service accrued or other events occurring before the
                adoption date of the amendment.
                 (2) Prospective. A benefit or benefit increase must not be adopted
                during the SFA coverage period unless--
                 (i) The plan actuary certifies that employer contribution increases
                projected to be sufficient to pay for the benefit increase have been
                adopted or agreed to; and
                 (ii) Those increased contributions were not included in the
                determination of the special financial assistance.
                 (c) Allocation of plan assets. During the SFA coverage period, plan
                assets, including special financial assistance, must be invested in
                permissible investments as described in Sec. 4262.14 sufficient to pay
                for at least 1 year (or until the date the plan is projected to become
                insolvent, if earlier) of projected benefit payments and administrative
                expenses.
                 (d) Contribution decreases. (1) During the SFA coverage period, the
                contributions to a plan that receives special financial assistance
                required for each contribution base unit must not be less than, and the
                definition of the contribution base units used must not be different
                from, those set forth in collective bargaining agreements or plan
                documents (including contribution increases to the end of the
                collective bargaining agreements) in effect on March 11, 2021, unless
                the plan sponsor determines that the change lessens the risk of loss to
                plan participants and beneficiaries and, if the contribution reduction
                affects annual contributions over $10 million and over 10 percent of
                all employer contributions, PBGC also determines that the change
                lessens the risk of loss to plan participants and beneficiaries.
                 (2) A request for PBGC approval of a proposed contribution change
                that affects annual contributions over $10 million and over 10 percent
                of all employer contributions must be submitted by the plan sponsor or
                its duly authorized representative and must contain all of the
                following information:
                 (i) Name, address, email, and telephone number of the plan sponsor
                and the plan sponsor's authorized representatives, if any.
                 (ii) The nine-digit employer identification number (EIN) assigned
                to the plan sponsor by the IRS and the three-digit plan identification
                number (PN) assigned to the plan by the plan sponsor, and, if
                different, the EIN and PN last filed with PBGC. If an EIN or PN has not
                been assigned, that should be indicated.
                 (iii) Name, address, email, and telephone number of the
                contributing employer for which the proposed contribution change is
                being submitted, and the employer's authorized representatives, if any.
                 (iv) Names and addresses of each controlled group member, along
                with a chart depicting the structure of the controlled group by entity
                and its ownership with ownership percentage.
                 (v) Audited financial statements (income statement, balance sheet,
                cash
                [[Page 36629]]
                flow statement, and notes) for the contributing employer and the
                consolidated group including the contributing employer, if available,
                for the most recent 4 years, or, if audited financial statements were
                not prepared, unaudited financial statements, a statement explaining
                why audited statements are not available, and tax returns with all
                schedules for the most recent 4 years available. The financial
                statement submissions must:
                 (A) Identify the cash contributions to the multiemployer plan for
                which the contributing employer is seeking contribution relief;
                 (B) Identify all outstanding indebtedness, including the name of
                the lender, the amount of the outstanding loan, scheduled repayments
                interest rate, collateral, significant covenants, and whether the loan
                is in default;
                 (C) Identify and explain any material changes in financial position
                since the date of the last financial statement;
                 (D) To the extent that the contributing employer has undergone or
                is in the process of undergoing a partial liquidation, estimate the
                sales, gross profit, and operating profit that would have been reported
                for each of the 3 years covered by the financial statement for only
                that portion of the business that is currently expected to continue;
                and
                 (E) State the estimated liquidation values for any assets related
                to discontinued operations or operations that are not expected to
                continue, along with the sources for the estimates.
                 (vi) Projected financial statements (income statement, balance
                sheet, cash flow statement) for the current year and the following 4
                years as well as the key assumptions underlying those projections and a
                justification for the reasonableness for each of those key assumptions.
                The projections must include:
                 (A) All business or operating plans prepared by or for management,
                including all explanatory text and schedules;
                 (B) All financial submissions, if any, made within the prior 3
                years to a financial institution, government agency, or investment
                banker in support of possible outside financing or sale of the
                business;
                 (C) All recent financial analyses done by an outside party with a
                certification by the employer's chief executive officer that the
                information on which each analysis is based is accurate and complete;
                and
                 (D) Any other relevant information.
                 (vii) Description of events leading to the current financial
                distress.
                 (viii) Description of financial and operational restructuring
                actions taken to address financial distress, including cost cutting
                measures, employee count or compensation reductions, creditor
                concessions obtained, and any other restructuring efforts undertaken;
                also, indicate whether any new profit-sharing or other retirement plan
                has been or will be established or if benefits under such existing plan
                will be increased.
                 (e) Allocating contributions and other practices. During the SFA
                coverage period, a decrease in the proportion of income or an increase
                in the proportion of expenses allocated to a plan that receives special
                financial assistance pursuant to a written or oral agreement or
                practice (other than a written agreement in existence on March 11,
                2021, to the extent not subsequently amended or modified) under which
                the income or expenses are divided or to be divided between a plan that
                receives special financial assistance and one or more other employee
                benefit plans is prohibited. The prohibition in the preceding sentence
                does not apply to a good faith allocation of:
                 (1) Contributions pursuant to a reciprocity agreement;
                 (2) Costs of securing shared space, goods, or services, where such
                allocation does not constitute a prohibited transaction under ERISA or
                is exempt from such prohibited transaction provisions pursuant to
                section 408(b)(2) or 408(c)(2) of ERISA, or pursuant to a specific
                prohibited transaction exemption issued by the Department of Labor
                under section 408(a) of ERISA;
                 (3) The actual cost of services provided to the plan by an
                unrelated third party; or
                 (4) Contributions where the contributions to a plan that receives
                special financial assistance required for each base unit are not
                reduced, except as otherwise permitted by paragraph (d) of this
                section.
                 (f) Transfer or merger. During the SFA coverage period, a plan must
                not engage in a transfer of assets or liabilities (including a spinoff)
                or merger except with PBGC's approval. Notwithstanding anything to the
                contrary in 29 CFR part 4231, the plans involved in the transaction
                must request approval from PBGC.
                 (1) PBGC will approve a proposed transfer of assets or liabilities
                (including a spinoff) or merger if PBGC determines that the transaction
                complies with section 4231(a)-(d) of ERISA and that the transaction, or
                the larger transaction of which the transfer or merger is a part, does
                not unreasonably increase PBGC's risk of loss with respect to any plan
                involved in the transaction, and is not reasonably expected to be
                adverse to the overall interests of the participants and beneficiaries
                of any of the plans involved in the transaction.
                 (2) A request for approval of a proposed transfer of assets or
                liabilities (including a spinoff) or merger must be submitted by the
                plan sponsor or its duly authorized representative and must contain the
                information that must be submitted with a notice of merger or transfer
                and a request for a compliance determination under subpart A of part
                4231 of this chapter and all of the following actuarial and financial
                information for each of the plans involved in the transaction:
                 (i) A certification by the enrolled actuary that the plan or any of
                its component parts received special financial assistance and the most
                recent value of special financial assistance assets.
                 (ii) A copy of the actuarial valuation performed for each of the 2
                plan years before the most recent actuarial valuation filed in
                accordance with Sec. 4231.9(f) of this chapter.
                 (iii) A copy of the plan actuary's most recent certification under
                section 305(b)(3) of ERISA, including a detailed description of the
                assumptions used in the certification, and the basis under which they
                were determined. The description must include information about the
                assumptions used for the projection of future contributions, withdrawal
                liability payments, and investment returns, and any other assumption
                that may have a material effect on projections.
                 (iv) A detailed statement certified by an enrolled actuary that the
                transaction does not unreasonably increase PBGC's risk of loss with
                respect to any plan involved in the transaction. The statement must
                include the basis for the conclusion, supporting data, calculations,
                assumptions, a description of the methodology, the basis for
                assumptions used, the projected date of insolvency, and the present
                value of financial assistance expected to be paid to the plan by PBGC
                under section 4261 of ERISA as of the date of the transaction
                individually for each of the plans before and after the transaction.
                The present value of financial assistance must be based on the
                guaranteed benefits and administrative expenses presented in the cash
                flow projections under paragraph (f)(2)(v) of this section, discounted
                using interest rates published under section 4044 of ERISA.
                 (v) The statement in paragraph (f)(2)(iv) of this section must
                include an exhibit showing the annual cash flow projections for each
                plan before and after the transaction, through the year that each plan
                pays its last dollar of
                [[Page 36630]]
                benefit (but not to exceed 100 years). The cash flow projection should
                use an open group valuation until the plan reaches insolvency. Annual
                cash flow projections must reflect the following information:
                 (A) Fair market value of assets as of the beginning of the year,
                splitting the assets by special financial assistance and non-special
                financial assistance amounts.
                 (B) Contributions and withdrawal liability payments.
                 (C) Plan level benefit payments organized by participant type
                (e.g., active, retiree, terminated vested) for the projection period.
                 (D) Guaranteed benefits payable post insolvency by participant type
                (e.g., active, retiree, terminated vested).
                 (E) Administrative expenses for the projection period.
                 (F) Assumed investment return separately for special financial
                assistance and non-special financial assistance amounts.
                 (G) Fair market value of assets as of the end of the year.
                 (vi) Any additional information PBGC determines it needs to review
                a request for approval of a proposed transfer of assets or liabilities
                (including a spinoff) or merger.
                 (g) Withdrawal liability interest assumptions. A plan must use the
                interest assumptions under Sec. 4281.13(a) of this chapter to
                determine withdrawal liability for withdrawals after the plan year in
                which the plan receives payment of special financial assistance under
                Sec. 4262.12 and until the later of--
                 (1) Ten years after the end of the plan year in which the plan
                receives payment of special financial assistance under Sec. 4262.12;
                or
                 (2) The last day of the plan year in which the plan no longer holds
                any special financial assistance or earnings thereon in a segregated
                account as required by Sec. 4262.13(b)(2).
                 (h) Withdrawal liability settlement. (1) During the SFA coverage
                period, a plan must obtain PBGC approval for a proposed settlement of
                withdrawal liability if the amount of the liability settled is greater
                than $50 million calculated as the lesser of--
                 (i) The allocation of unfunded vested benefits to the employer
                under section 4211 of ERISA; or
                 (ii) The present value of withdrawal liability payments assessed
                for the employer discounted using the interest assumptions under Sec.
                4281.13(a) of this chapter.
                 (2) PBGC will approve a proposed settlement of withdrawal liability
                if it determines--
                 (i) Implementation of the settlement is in the best interests of
                participants and beneficiaries; and
                 (ii) The settlement does not create an unreasonable risk of loss to
                PBGC.
                 (3) A request for approval of a proposed settlement of withdrawal
                liability must be submitted by the plan sponsor or its duly authorized
                representative and must contain all of the following information:
                 (i) Name, address, email, and telephone number of the plan sponsor
                and the plan sponsor's authorized representatives, if any.
                 (ii) The nine-digit employer identification number (EIN) assigned
                to the plan sponsor by the IRS and the three-digit plan number (PN)
                assigned to the plan by the plan sponsor, and, if different, the EIN
                and PN last filed with PBGC. If an EIN or PN has not been assigned,
                that should be indicated.
                 (iii) A copy of the proposed settlement agreement.
                 (iv) A description of the facts leading up to the proposed
                settlement, including--
                 (A) The date the employer withdrew from the plan;
                 (B) The calculation of the withdrawal liability amount, including
                payment dates and amounts listed in the schedule for liability payments
                provided to the withdrawn employer in accordance with section
                4291(b)(1)(A) of ERISA;
                 (C) The amount(s) and date(s) of withdrawal liability payments
                made; and
                 (D) How the proposed settlement amount was determined (discount
                rate used, financial condition of the employer, and other factors, as
                applicable).
                 (v) Most recent 3 years of audited financial statements and a 5-
                year cash flow projection for the employer with which the plan proposes
                to settle.
                 (vi) A copy of the most recent actuarial valuation report of the
                plan.
                 (vii) A statement certifying the trustees have determined that the
                proposed settlement is in the best interest of the plan and the plan's
                participants and beneficiaries.
                 (viii) Any additional information PBGC determines it needs to
                review a request for approval of a proposed withdrawal liability
                settlement.
                 (i) Reporting. In accordance with the statement of compliance
                instructions on PBGC's website at www.pbgc.gov, a plan sponsor must
                file with PBGC each plan year, beginning with the plan year after the
                payment of special financial assistance and through the last day of the
                last plan year ending in 2051, a statement of compliance with the terms
                and conditions of the special financial assistance under this part and
                section 4262 of ERISA. The statement must be--
                 (1) Filed no later than 90 days after the end of the plan year; and
                 (2) Signed and dated by a trustee who is a current member of the
                board of trustees and authorized to sign on behalf of the board of
                trustees, or by another authorized representative of the plan sponsor.
                 (j) Audit. As authorized under section 4003 of ERISA, PBGC may
                conduct periodic audits of a plan that has received special financial
                assistance to review compliance with the terms and conditions of the
                special financial assistance under this part and section 4262 of ERISA.
                 (k) Filing rules. The filing rules in this paragraph (k) apply to a
                request for PBGC approval under paragraph (d), (f), or (h) of this
                section and a statement of compliance under paragraph (i) of this
                section.
                 (1) Method of filing. A filing described under paragraph (d), (f),
                (h), or (i) of this section must be made electronically in accordance
                with the rules in subpart A of part 4000 of this chapter. The time
                period for filing a request or statement of compliance must be computed
                under the rules in subpart D of part 4000 of this chapter.
                 (2) Where to file. A filing described under paragraph (d), (f),
                (h), or (i) of this section must be submitted as described in Sec.
                4000.4 of this chapter.
                Sec. 4262.17 Other provisions.
                 (a) Special financial assistance is not capped by the guarantee
                under section 4022A of ERISA.
                 (b) A plan that receives special financial assistance must continue
                to pay premiums due under section 4007 of ERISA for participants and
                beneficiaries in the plan.
                 (c) A plan that receives special financial assistance is deemed to
                be in critical status within the meaning of section 305(b)(2) of ERISA
                until the last day of the last plan year ending in 2051.
                 (d) A plan that receives special financial assistance and
                subsequently becomes insolvent under section 4245 of ERISA will be
                subject to the rules and guarantee for insolvent plans in effect when
                the plan becomes insolvent.
                 (e) A plan that receives special financial assistance is not
                eligible to apply for a suspension of benefits under section 305(e)(9)
                of ERISA.
                 (f) A plan that receives special financial assistance and meets the
                eligibility requirements for partition of the plan under section
                4233(b) of ERISA may apply for partition.
                 (g) If any provision in this part is held to be invalid or
                unenforceable by its
                [[Page 36631]]
                terms, or as applied to any person or circumstance, or stayed pending
                further agency action, the provision will be construed so as to
                continue to give the maximum effect to the provision permitted by law,
                unless such holding will be one of utter invalidity or
                unenforceability, in which event the provision will be severable from
                this part and will not affect the remainder thereof.
                 Issued in Washington, DC.
                Gordon Hartogensis,
                Director, Pension Benefit Guaranty Corporation.
                [FR Doc. 2021-14696 Filed 7-9-21; 11:15 am]
                BILLING CODE 7709-02-P
                

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